Continued Steps to Stabilize Economy

October 8, 2008 at 5:53 pm Leave a comment

Feds and Others Cut Rates
The Federal Reserve and other central banks cut rates by 50 basis points in a concerted move to reduce the cost of buying and building homes and the costs associated with borrowing funds to run businesses. These cuts also reduce the rates at which banks borrow. This should induce banks to start lending again to bring liquidity back into the economy. While not the primary goal of the rate cuts, the markets responded quickly and positively to this news.

Treasury Publishes Conflict of Interest Provisions and Requests Submissions of Application for Asset Managers and Custodians
The United States Treasury is moving quickly to implement the Emergency Economic Stabilization Act of 2008 (“EESA”) that was signed into law on Friday, October 3, 2008. On October 6, 2008, the Treasury published notices under EESA requesting proposals for items outlined below and interim guidelines for conflicts of interest. Included in the items published by the Treasury are the following:

  • Interim Guidelines for Conflicts of Interest;
  • Procurement Authorities and Procedures; and
  • Three Notices to Financial Institutions interested in providing the following services:
    • Custodian, Accounting, Auction Management, and Other Infrastructure Services for a portfolio of troubled mortgage-related assets. Minimum Qualification-$500 billion in domestic assets currently under custody.
    • Asset management services for a portfolio of mortgage whole loans. Minimum Qualification-$25 billion in mortgage loans currently under management or proof of ability to handle a portfolio of such size.
    • Asset management services for a portfolio of troubled mortgage-related securities. Minimum Qualification-$100 billion in dollar-denominated fixed-income assets currently under management.

RFP Deadline.
Responsive RFPs are due by the end of today, October 8, 2008 at 5:00 p.m. Eastern Time.

Selection of Custodians, etc.
The Treasury plans to select the custodians, accountants, auction management and other infrastructure service providers first. The current schedule is to select them by October 10th and enter into financial agency agreements on October 11, 2008. Further, the service providers are to be prepared to begin working on October 11, 2008.

Selection of Asset Managers; Smaller/Minority/Female-Owned Institutions. The time table for selecting the asset management service providers is not described in the referenced notices, but the Treasury plans to conduct interviews and warns that it will be acting quickly. Treasury will also expect immediate responses from selected candidates. In addition, at a later date to ensure diversity of participation, the Treasury will provide a separate notice requesting applications from smaller and minority- and female-owned financial institutions to act as sub-asset managers within specific portfolios.

Treasury Link.
The Treasury regulations and applications to provide services are available at the new Treasury site regarding EESA.

Entry filed under: Client Alerts.

Summary of the Emergency Economic Stabilization Act of 2008 (“EESA”) FDIC Interim Rule on Temporary Increase in Standard Coverage Amount and on Mortgage Servicing Accounts

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