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In response to questions on the Temporary Liquidity Guarantee Program involving the programs guarantee on newly issued senior unsecured debt we offer the following suggestions:
The overnight federal funds program should be considered exempt from the 75 basis point premium since this program is used by banks mainly for settling daily liquidity needs. The fee being charged for overnight funds as proposed would be costly to community banks that might only have used the federal funds line for one or two days in a given period.
The allowed amount of guaranteed debt should be the total combination of the holding company and its subsidiaries. This would allow either the holding company or the bank to issue the unsecured debt with this guarantee as long as it did not exceed the cap of both entities.
In establishing an alternative guarantee cap for the institutions that did not have any unsecured debt on September 30, 2008, a percentage of total liabilities, such as 2 % , for both the holding company and its subsidiaries would allow institutions that have not incurred any unsecured debt for a considerable period to be able to participate in the program.
Carol A. Bears, AVP
|Last Updated 11/06/2008