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FDIC Approves Phase Out Of TLGP

Debt Guarantee Program ends on October 31, 2009

The Federal Deposit Insurance Corporation (FDIC) Board has adopted a Notice of Proposed Rulemaking (NPR) that reaffirms the expiration of the debt guarantee component of the Temporary Liquidity Guarantee Program (TLGP), on October 31, 2009.

As per NPR, the FDIC intends to seek comment on whether a temporary emergency facility should be left in place for six months after the expiration of the current program.

There are two alternatives contemplated under the NPR. Under Alternative A, the DGP would expire as provided for by the FDIC’s existing regulation on October 31, 2009 with FDIC’s guarantee for such debt expiring no later than December 31, 2012.

As per Alternative B, the DGP will expire as provided for in the current regulation, however, the FDIC would establish a six-month emergency guarantee facility to be made available in emergency circumstances to insured depository institutions and certain other entities participating in the DGP upon application to the FDIC and with the approval of the Chairman, after consultation with the Board.

In October 2008, FDIC had adopted TLGP as part of a coordinated effort by the FDIC and other federal agencies to address disruptions in credit markets and the resultant inability of financial institutions to obtain funding and make loans to creditworthy borrowers.