[Federal Register Volume 73, Number 210 (Wednesday, October 29, 2008)]
[Rules and Regulations]
[Pages 64179-64191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25739]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 370

RIN 3064-AD37


Temporary Liquidity Guarantee Program

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Interim rule with request for comments.

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SUMMARY: The FDIC is issuing this Interim Rule following a 
determination of systemic risk pursuant to section 13(c)(4)(G) of the 
Federal Deposit Insurance Act. As a result of this

[[Page 64180]]

systemic risk determination, and in an effort to avoid or mitigate 
serious adverse effects on economic conditions or financial stability, 
the FDIC is establishing the Temporary Liquidity Guarantee Program. As 
further described in the Interim Rule, the Temporary Liquidity 
Guarantee Program has two primary components: the Debt Guarantee 
Program, by which the FDIC will guarantee the payment of certain newly-
issued senior unsecured debt, and the Transaction Account Guarantee 
Program, by which the FDIC will guarantee certain noninterest-bearing 
transaction accounts.

DATES: The Interim Rule becomes effective on October 23, 2008, except 
for paragraphs (h)(2) and (h)(3) of Sec.  370.5 which will become 
effective December 1, 2008. Coverage under the Temporary Liquidity 
Guarantee Program was established by the Board of Directors of the FDIC 
as of October 14, 2008. Comments on the rule must be received by 
November 13, 2008.

ADDRESSES: You may submit comments on the Interim Rule, by any of the 
following methods:
     Agency Web Site: http://www.FDIC.gov/regulations/laws/federal/notices.html. Follow instructions for submitting comments on 
the Agency Web Site.
     E-mail: [email protected]. Include RIN  3064-AD37 
on the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7 a.m. and 5 p.m.
    Instructions: All comments received will be posted generally 
without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Diane Ellis, Associate Director, 
Financial Risk Management, Division of Insurance and Research, (202) 
898-8978 or [email protected]; William V. Farrell, Manager, Assessment 
Operations Section, Division of Finance, (703) 562-6168 or 
[email protected]; Donna Saulnier. Manager, Assessment Policy Section, 
Division of Finance, (703) 562-6167 or [email protected]; Richard 
Bogue, Counsel, Legal Division, (202) 898-3726 or [email protected]; 
Robert Fick, Counsel, Legal Division, (202) 898-8962 or [email protected]; 
A. Ann Johnson, Counsel, Legal Division, (202) 898-3573 or 
[email protected]; Gail Patelunas, Deputy Director, Division of 
Resolutions and Receiverships, (202) 898-6779 or [email protected]; 
John Corston, Associate Director (Large Bank Supervision), Division of 
Supervision and Consumer Protection, (202) 898-6548 or 
[email protected]; Serena L. Owens, Associate Director, Supervision and 
Applications Branch, Division of Supervision and Consumer Protection, 
(202) 898-8996 or [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    In light of the unprecedented disruption in the nation's credit 
markets, the Congress, the Department of the Treasury, and the Federal 
Deposit Insurance Corporation (FDIC), along with other federal banking 
regulators, have taken steps to preserve the nation's confidence in its 
financial institutions and in the American and global economy. Congress 
recently passed the Emergency Economic Stabilization Act of 2008; \1\ 
the Department of the Treasury provided for capital injections into 
banks; the Board of Governors of the Federal Reserve System made 
available commercial paper facilities; Congress temporarily raised 
deposit insurance limits and the FDIC issued interim regulations 
accordingly.\2\ Nonetheless, many insured depository institutions have 
responded to the market turmoil by retaining cash and severely 
tightening their lending standards. Disruptions in money markets have 
significantly impaired the ability of creditworthy companies to issue 
commercial paper, particularly at longer maturities. Interest rates on 
commercial paper continue to be extremely high. Issuances of 
residential and commercial mortgage-backed securities in the first half 
of 2008 have fallen by more than 90 percent from levels one year ago, 
and issuances of asset-backed securities have fallen 68 percent over 
the same period. As a result of this market volatility, economic 
concern has intensified, and short-term funding markets have slowed 
significantly.
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    \1\ Public Law No. 110-343 (Oct. 3, 2008).
    \2\ 73 FR 61658 (Oct. 17, 2008).
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    FDIC analysis suggests that a five percent reduction in uninsured 
deposits would reduce Gross Domestic Product growth by 1.2 percent per 
year in a normal economy and 2.0 percent per year in a stressed 
economy. With U.S. economic growth currently stressed, a run of this 
magnitude could result in, or deepen and prolong, recession. FDIC data 
indicate rapid and substantial outflows of uninsured deposits from 
institutions that are perceived to be stressed. The systemic nature of 
this threat is further evidenced by the increasing number of bank 
failures.

II. Systemic Risk Determination

    The severity of today's financial conditions affects more than just 
a single insured depository institution: the financial stability of a 
significant number of financial institutions is being threatened, and 
the nation's entire financial system appears to be at risk.
    Section 141 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (FDICIA) \3\ added section 13(c)(4)(G) to the 
Federal Deposit Insurance Act (FDI Act). 12 U.S.C. 1823(c)(4)(G). That 
section provides a blueprint that authorizes action by the Federal 
government in circumstances involving such systemic risk. This 
provision permits the FDIC to take action or provide assistance as 
necessary to avoid or mitigate the effects of the perceived risks, 
following a recommendation of the existence of systemic risk by the 
Board, with the written concurrence of the Board of Governors of the 
Federal Reserve System (FRB) and an eventual determination of systemic 
risk by the Secretary of the Treasury (after consultation with the 
President).
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    \3\ Public Law No. 102-242 (Dec. 19, 1991).
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    The Secretary of the Treasury (after consultation with the 
President) made a determination of systemic risk following receipt of 
the written recommendation of the Board on October 13, 2008, along with 
the written recommendation of the FRB, in accordance with section 
13(c)(4)(G) to the FDI Act. 12 U.S.C. 1823(c)(4)(G). The determination 
of systemic risk allowed the FDIC to take certain actions to avoid or 
mitigate serious adverse effects on economic conditions and financial 
stability. The FDIC announced a number of initiatives aimed at reducing 
the systemic risks that exist in the market, specifically relating to 
noninterest-bearing transaction accounts at insured depository 
institutions and senior unsecured debt of insured depository 
institutions and most U.S. holding companies of such insured depository 
institutions. Collectively these initiatives are described more fully 
in the Interim Rule that follows, and are referred to as the FDIC's 
Temporary Liquidity Guarantee Program (TLG Program).
    In making its written recommendation regarding systemic risk and 
providing for the TLG Program, the Board reviewed a number of factors 
concerning current economic conditions and the nation's troubled 
financial

[[Page 64181]]

stability. Among the economic factors that the Board considered in 
making its determination were unduly tightened lending standards and 
terms, decreased borrowing, rapid outflows of deposits, reduced 
issuances of commercial paper and asset- and mortgage-backed 
securities, decreased and costly alternative funding mechanisms, and a 
lack of confidence in financial institutions based on embedded and 
uncertain balance sheet losses.

III. Authority To Implement the TLG Program

    In addition to the authority granted to the FDIC by the systemic 
risk determination made under Section 13(c)(4) of the FDI Act, 12 
U.S.C. 1823(c)(4), as described above, the FDIC is authorized under 
Section 9(a) Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth, to 
prescribe, by its Board of Directors, such rules and regulations as it 
may deem necessary to carry out the provisions of the FDI Act. The 
Board has determined that this Interim Rule is necessary to implement 
the TLG Program. Similarly the FDIC has authority to adopt regulations 
governing the operations of its receiverships pursuant to Section 
11(d)(1) of the FDI Act, 12 U.S.C. 1821(d)(1) and the broad authority 
granted by 12 U.S.C. 1823(c)(1).

IV. The Interim Rule

    The TLG Program described in the Interim Rule will address the 
systemic risk recognized by the FDIC and the other agencies. The TLG 
Program is designed to preserve confidence and encourage liquidity in 
the banking system in order to ease lending to creditworthy businesses 
and consumers. The TLG Program is a voluntary and time-limited program 
that will be funded through special fees without reliance on taxpayer 
funding. Subject to the conditions set forth in the regulation, the 
program consists of two basic components: A temporary guarantee of 
newly-issued senior unsecured debt (the Debt Guarantee Program) and a 
temporary unlimited guarantee of funds in noninterest-bearing 
transaction accounts at FDIC-insured institutions (the Transaction 
Account Guarantee Program). At the expiration of the TLG Program, if 
funds remain after the FDIC has satisfied all eligible claims, the 
surplus funds will remain in the Deposit Insurance Fund and will be 
included in the future calculation of the reserve ratio.
    The following entities are eligible to participate in the program 
subject to any restrictions that might be imposed by the FDIC in 
consultation with the primary regulator: FDIC-insured depository 
institutions, any U.S. bank holding company or financial holding 
company, and any U.S. savings and loan holding company that either 
engages only in activities that are permissible for financial holding 
companies to conduct under section (4)(k) of the Bank Holding Company 
Act of 1956 (BHCA) or has at least one insured depository institution 
subsidiary that is the subject of an application that was pending on 
October 13, 2008, pursuant to section 4(c)(8) of the BHCA, or any 
affiliate of these entities approved by the FDIC after a written 
request made by, and the positive recommendation of, the appropriate 
Federal banking agency. (eligible entities). To be an eligible entity 
and issue guaranteed debt pursuant to the Debt Guarantee Program, a 
bank or savings and loan holding company must have at least one 
chartered, insured, and operating bank or savings association within 
its holding company structure.
    The TLG Program became effective on October 14, 2008. For the first 
30 days of the program, all eligible entities are covered under the TLG 
Program, and the guarantees provided by the TLG Program will be offered 
at no cost to eligible entities. On or before November 12, 2008, 
however, eligible entities must inform the FDIC whether they will opt-
out of the TLG Program, and they may notify the FDIC on or before that 
date of their intent to participate in the program. If an eligible 
entity opts out of the TLG Program, the FDIC's guarantee of its newly-
issued senior unsecured debt and noninterest-bearing transaction 
deposit accounts will expire at the earlier of 11:59 pm EST on 
November, 12, 2008, or at the time of the FDIC's receipt of the 
eligible entity's opt-out decision, regardless of the term of the 
instrument. An eligible entity that chooses not to opt out of either or 
both programs will become a participating entity in the program.
    An eligible entity may elect to opt out of either the Debt 
Guarantee Program or the Transaction Account Guarantee Program or of 
both components of the TLG Program. All eligible entities within a U.S. 
Banking Holding Company or a U.S. Savings and Loan Holding Company 
structure must make the same decision regarding continued participation 
in each component of the TLG Program or none of the members of the 
holding company structure will be eligible for participation in that 
component of the TLG Program.
    In order to notify depositors and lenders when they are dealing 
with an institution that is covered by the TLG Program, an eligible 
entity's decision to opt out of either component of the TLG Program 
will be made publicly available. The FDIC will maintain and will post 
on its Web site a list of those entities that have opted out of either 
or both components of the TLG Program. Each eligible entity must make 
clear to relevant parties whether or not it has chosen to participate 
in either or both components of the TLG Program. Eligible entities that 
do not opt out of the Debt Guarantee Program on or before November 12, 
2008, will be unable to select which newly issued senior unsecured debt 
is guaranteed debt as they issue such debt. All senior unsecured debt 
issued during the initial 30-day period by the participating entity 
will become guaranteed debt as and when issued.
    If an eligible entity remains in the Debt Guarantee Program of the 
TLG Program, it must clearly disclose to interested lenders and 
creditors, in writing and in a commercially reasonable manner, what 
debt it is offering and whether the debt is guaranteed under this 
program. Debt guaranteed by the FDIC under the Debt Guarantee Program, 
must be clearly identified as ``guaranteed by the FDIC'' and properly 
disclosed to creditors.
    If an eligible entity remains in the Transaction Account Guarantee 
Program, the participating entity must prominently disclose in writing 
at its main office and at all branches at which deposits are taken its 
decision to participate in or opt-out of the Transaction Account 
Guarantee Program. These disclosures must be provided in simple, 
readily understandable text indicating the institution's participation 
or nonparticipation in the Transaction Account Guarantee Program. The 
disclosure must clearly state whether or not covered noninterest-
bearing transaction accounts are fully insured by the FDIC. If the 
institution uses sweep arrangements or takes other actions that result 
in funds in a noninterest-bearing transaction account being transferred 
to or reclassified as an interest-bearing account or a non-transaction 
account, the institution also must disclose those actions to the 
affected customers and clearly advise them in writing that such actions 
will void the transaction account guarantee.

A. The Debt Guarantee Program

    The Debt Guarantee Program temporarily will guarantee all newly-
issued senior unsecured debt up to prescribed limits that is issued by 
participating entities on or after October 14, 2008, through and 
including June 30, 2009. As a result, the unpaid balance

[[Page 64182]]

of this newly-issued senior unsecured debt will be paid by the FDIC 
upon the failure of the issuing institution or the filing of a 
bankruptcy petition with respect to the issuing holding company. As 
more fully explained in the interim rule, senior unsecured debt 
includes, without limitation, federal funds purchased, promissory 
notes, commercial paper, unsubordinated unsecured notes, certificates 
of deposit standing to the credit of a bank, bank deposits in an 
international banking facility (IBF) of an insured depository 
institution, and Eurodollar deposits standing to the credit of a bank. 
Senior unsecured debt may be denominated in foreign currency. The term 
``bank'' means an insured depository institution or a depository 
institution regulated by a foreign bank supervisory agency. To be 
eligible for the Debt Guarantee Program, senior unsecured debt must be 
noncontingent. It must be evidenced by a written agreement, contain a 
specified and fixed principal amount to be paid on a date certain, and 
not be subordinated to another liability.
    The primary purpose of the Debt Guarantee Program is to provide 
liquidity to the inter-bank lending market and promote stability in the 
unsecured funding market for banks. The purpose is not to encourage 
innovative, exotic or complex funding structures or to protect lenders 
who make high-risk loans in hopes of high returns. Thus, for purposes 
of the Debt Guarantee Program, senior unsecured debt excludes, for 
example, obligations from guarantees or other contingent liabilities, 
derivatives, derivative-linked products, debt paired with any other 
security, convertible debt, capital notes, the unsecured portion of 
otherwise secured debt, negotiable certificates of deposit, and 
deposits in foreign currency and Eurodollar deposits that represent 
funds swept from individual, partnership or corporate accounts held at 
insured depository institutions. Also excluded are loans to affiliates, 
including parents and subsidiaries, or to institution affiliated 
parties, including controlling shareholders, directors, and officers.
    Eligible debt must be issued on or before June 30, 2009. For 
eligible debt issued by that date, the FDIC will provide the guarantee 
coverage for such debt until the earlier of the maturity date of the 
debt or until June 30, 2012. This final effective date for coverage is 
absolute; coverage will expire at 11:59 p.m. EST on June 30, 2012, 
regardless of whether the liability has matured at that time. If an 
eligible entity chooses to opt out of the Debt Guarantee Program, the 
FDIC's debt guarantee will terminate on the earlier of 11:59 p.m. EST 
p.m. on November 12, 2008, or at the time of the eligible entity's opt-
out decision. In order for the newly-issued senior unsecured debt to be 
guaranteed, the debt instrument must be clearly identified in writing 
in a commercially reasonable manner on the face of any documentation as 
``guaranteed by the FDIC,'' and this fact must be properly disclosed to 
the creditors. The Debt Guarantee Program will not apply to debt that 
is contractually subordinated to other debt of the entity.
    The FDIC will temporarily guarantee newly issued unsubordinated 
debt in a total amount up to 125 percent of the par or face value of 
senior unsecured debt outstanding, excluding debt extended to 
affiliates, as of September 30, 2008, that is scheduled to mature on or 
before June 30, 2009. This maximum guaranteed amount will be calculated 
for each individual participating entity within a holding company 
structure. Under procedures to be detailed shortly, the FDIC will 
require that each participating entity calculate its outstanding senior 
unsecured debt as of September 30, 2008, and provide that information--
even if the amount of the senior unsecured debt is zero--to the FDIC.
    The 125 percent limit may be adjusted for certain participating 
entities if the FDIC, in consultation with any appropriate Federal 
banking agency, determines it is necessary. Additionally, after written 
request and positive recommendation by the appropriate Federal banking 
agency, the FDIC, in its sole discretion and on a case-by-case basis, 
may allow an affiliate of a participating entity to take part in the 
Debt Guarantee Program. The FDIC may grant a participating entity 
authority to temporarily exceed the 125 percent limitation or limit a 
participating entity to less than 125 percent. These decisions will be 
made on a case-by-case basis.
    A participating entity may not represent that its debt is 
guaranteed by the FDIC if it does not comply with the rules governing 
the Debt Guarantee Program. If the issuing entity has opted out of the 
Debt Guarantee Program, it may no longer represent that its newly-
issued debt is guaranteed by the FDIC. Similarly, once an entity has 
reached its 125 percent limit, it may not represent that any additional 
debt is guaranteed by the FDIC, and must specifically disclose that 
such debt is not guaranteed.
    After consultation with a participating entity's appropriate 
Federal banking agency, the FDIC may determine in its discretion that 
the entity shall not be permitted to participate in the TLG Program. 
Termination of participation will have only a prospective effect, and 
the entity must notify its customers and creditors that it is no longer 
issuing guaranteed debt.
    Entities who choose to participate in the Debt Guarantee Program 
and who issue guaranteed debt agree to supply information requested by 
the FDIC, as well as to be subject to FDIC on-site reviews as needed 
after consultation with the appropriate Federal banking agency to 
determine compliance with the terms and requirements of the Debt 
Guarantee Program. Participating entities also agree that they will be 
bound by the FDIC's decisions, in consultation with the appropriate 
federal banking agency, regarding the management of the TLG Program.
    The FDIC's agreement arising from the Debt Guarantee Program in no 
way exempts any participating entity from complying with federal and 
state securities laws and with any other applicable laws.

B. The Transaction Account Guarantee Program

    Under the Transaction Account Guarantee Program, the FDIC has 
provided a temporary full guarantee for funds held at FDIC-insured 
depository institutions in noninterest-bearing transaction accounts 
above the existing deposit insurance limit. The FDIC anticipates that 
these accounts will include payment-processing accounts, such as 
payroll accounts, frequently used by an insured depository 
institution's business customers, and further anticipates that the 
Transaction Account Guarantee Program will stabilize these and other 
similar accounts. This coverage became effective on October 14, 2008, 
and will continue through December 31, 2009 (assuming that the insured 
depository institution does not opt out of this component of the TLG 
Program).
    Under the Interim Rule, a ``noninterest-bearing transaction 
account'' is defined as a transaction account with respect to which 
interest is neither accrued nor paid and on which the insured 
depository institution does not reserve the right to require advance 
notice of an intended withdrawal. This definition encompasses 
traditional demand deposit checking accounts that allow for an 
unlimited number of deposits and withdrawals at any time. It also 
encompasses official checks issued by an insured depository 
institution. This definition, however, does not encompass negotiable 
order of

[[Page 64183]]

withdrawal (NOW) accounts or money market deposit accounts (MMDAs).
    Depository institutions sometimes waive fees or provide fee-
reducing credits for customers with checking accounts. Such account 
features do not prevent an account from qualifying under the 
Transaction Account Guarantee Program as a noninterest-bearing 
transaction account, as long as the account otherwise satisfies the 
definition.
    The guarantee provided for noninterest-bearing transaction accounts 
is in addition to and separate from the coverage provided under the 
FDIC's general deposit insurance regulations at 12 CFR Part 330. 
Although the unlimited coverage for noninterest-bearing transaction 
accounts under the TLG Program is intended primarily to apply to 
transaction accounts held by businesses, it applies to all such 
accounts held by any depositor. Thus, for example, if a consumer has a 
$250,000 certificate of deposit and a noninterest-bearing checking 
account for $50,000, he or she would be fully insured for $300,000 
(assuming the depositor has no other funds at the same institution). 
First, coverage of $250,000 would be provided for the certificate of 
deposit under the FDIC's general rules for deposit insurance coverage. 
See 12 CFR 330.1(n) (providing that the standard maximum deposit 
insurance amount is $250,000 through December 31, 2009). Separately, 
full coverage of the $50,000 checking account would be provided under 
the Transaction Account Guarantee Program.
    The Interim Rule includes a provision relating to sweep accounts. 
Under this provision, the FDIC will treat funds in sweep accounts in 
accordance with the usual rules and procedures for determining sweep 
balances at a failed depository institution. Under these procedures, 
funds may be swept or transferred from a noninterest-bearing 
transaction account to another type of deposit or nondeposit account. 
The FDIC will treat the funds as being in the account to which the 
funds were transferred. An exception will exist, however, for funds 
swept from a noninterest-bearing transaction account to a noninterest-
bearing savings account. Such swept funds will be treated as being in a 
noninterest-bearing transaction account. As a result of this treatment 
funds swept into a noninterest-bearing savings account will be 
guaranteed by the Transaction Account Guarantee Program.

C. Fees for the TLG Program

    Beginning on November 13, 2008, any eligible entity that has not 
chosen to opt out of the debt guarantee program will be assessed fees 
for continued coverage. All eligible debt issued from October 14, 2008 
(and still outstanding on November 13, 2008), through June 30, 2009, 
will be charged an annualized fee equal to 75 basis points multiplied 
by the amount of debt issued, and calculated for the maturity period of 
that debt or June 30, 2012, whichever is earlier. The fee charged will 
take into account that no fees will be charged during the first 30 days 
of the program. If any participating entity issues eligible debt 
guaranteed by the Debt Guarantee Program, the participating entity's 
assessment will be based on the total amount of debt issued and the 
maturity date at issuance. If the guaranteed debt is ultimately retired 
before its scheduled maturity, fees will not be refunded.
    If an eligible entity does not opt out, all newly-issued senior 
unsecured debt up to the maximum amount will become guaranteed as and 
when issued. Participating entities are prohibited from issuing 
guaranteed debt in excess of the maximum amount for the institution. 
Participating entities are also prohibited from issuing non-guaranteed 
debt until the maximum allowable amount of guaranteed debt has been 
issued. A participating entity can then issue non-guaranteed debt in 
any amount and for any maturity. If a participating entity nonetheless 
issues debt identified as ``guaranteed by the FDIC'' in excess of the 
limit established by the FDIC, it will have its assessment rate for 
guaranteed debt increased to 150 basis points on all outstanding 
guaranteed debt, and the participating entity and its institution-
affiliated parties will be subject to enforcement actions including the 
assessment of civil money penalties, as appropriate.
    Participating entities can take part in the guaranteed debt program 
as outlined above without any further action on their part. If a 
participating entity wants to have the option of issuing certain non-
guaranteed senior unsecured debt before issuing the maximum amount of 
guaranteed debt, it must elect to do so through FDICconnect on or 
before 11:59 p.m. EST on November 12, 2008. Election of this option 
would require a participating entity to pay a nonrefundable fee in 
exchange for which it will be able to issue, at any time and without 
regard to the cap, non-guaranteed senior unsecured debt with a maturity 
date after June 30, 2012. The fee would be applied to the par or face 
value of senior unsecured debt, excluding debt extended to affiliates, 
outstanding as of September 30, 2008, that is scheduled to mature on or 
before June 30, 2009. The fee will equal the 75 basis point annual rate 
charged for six months (or 37.5 basis points). The six-month period is 
based upon estimates of the weighted average remaining maturity of 
existing debt that matures on or before June 30, 2009. It recognizes 
that much of the outstanding debt as of September 30, 2008, which is 
not guaranteed, will be rolled over into guaranteed debt only when the 
outstanding debt matures. The nonrefundable fee will be collected in 
six equal monthly installments. An entity electing the nonrefundable 
fee option will also be billed as it issues guaranteed debt under the 
Debt Guarantee Program, and the amounts paid as a nonrefundable fee 
will be applied to offset these bills until the nonrefundable fee is 
exhausted. Thereafter, the institution will have to pay additional 
assessments on guaranteed debt as it issues the debt.
    Under the Transaction Account Guarantee Program, the FDIC provides 
a full guarantee for deposits held at FDIC-insured institutions in 
noninterest-bearing transaction accounts. This coverage became 
effective on October 14, 2008, and will expire at 11:59 p.m. EST on 
December 31, 2009 (assuming the insured depository institution does not 
opt out of the Transaction Account Guarantee Program). The Interim Rule 
provides that all insured depository institutions are automatically 
enrolled in the Transaction Account Guarantee Program for an initial 
thirty-day period (from October 14, 2008, through November 12, 2008). 
Insured depository institutions are not required to pay any assessments 
for participating in the Transaction Account Guarantee Program for this 
initial 30-day period.
    Beginning on November 13, 2008, insured depository institutions 
that have not opted out of the Transaction Account Guarantee Program 
will be assessed on a quarterly basis an annualized 10 basis point 
assessment on balances in noninterest-bearing transaction accounts that 
exceed the existing deposit insurance limit of $250,000. Under the 
Interim Rule, the FDIC will collect such assessments at the same time 
and in the same manner as it collects an institution's quarterly 
deposit insurance assessments under Part 327 of the FDIC's rules and 
regulations. Assessments associated with the Transaction Account 
Guarantee Program will be in addition to an institution's risk-based 
assessment imposed under Part 327 of the FDIC's rules and regulations.
    The Interim Rule requires the FDIC to impose an emergency systemic 
risk assessment on insured depository institutions if the fees and 
assessments

[[Page 64184]]

collected under the TLG Program are insufficient to cover any loss 
incurred as a result of the TLG Program. In addition, if at the 
conclusion of these programs there are any excess funds collected from 
the fees associated with the TLG Program, the funds will remain as part 
of the Deposit Insurance Fund.

D. Payment of Claims by the FDIC Pursuant to the Transaction Account 
Guarantee Program

    The Interim Rule sets forth the process for payment and recovery of 
FDIC guarantees of ``noninterest-bearing transaction accounts,'' as 
that term is defined in the Interim Rule. Under the rule, the FDIC's 
obligation to make payment, in its capacity as guarantor of deposits 
held in noninterest-bearing transaction accounts, arises upon the 
failure of a participating federally insured depository institution. 
The payment and claims process for satisfying claims under the 
Transaction Account Guarantee Program generally will follow the 
procedures prescribed for deposit insurance claims pursuant to section 
11(f) of the FDI Act (12 U.S.C. 1821(f)), and the FDIC will be 
subrogated to the rights of depositors against the institution pursuant 
to section 11(g) of the FDI Act (12 U.S.C. 1821(g)).
    The FDIC will make payment to the depositor for the guaranteed 
amount under the Transaction Account Guarantee Program or will make 
such guaranteed amount available in an account at another insured 
depository institution at the same time it fulfills its deposit 
insurance obligation under Part 330. The payment made pursuant to the 
Transaction Account Guarantee Program will be made as soon as possible 
after the FDIC, in its sole discretion, determines whether the deposit 
is eligible and what amount is ultimately guaranteed. In most cases, 
the FDIC will make the entire amount of a qualifying transaction 
account available to the depositor on the next business day following 
the failure of an institution that participates in the Transaction 
Account Guarantee Program. If there is no acquiring institution for a 
transaction account guaranteed by the Transaction Account Guarantee 
Program, the FDIC will mail a check to the depositor for the full 
amount of the guaranteed account within days of the insured depository 
institution's failure.
    As a result of assuming the receiver's responsibility for making 
payment on the transaction account, the FDIC will be subrogated to all 
rights of the depositor against the institution with respect to 
noninterest-bearing transaction accounts guaranteed by the Transaction 
Account Guarantee Program. This subrogation right includes the right of 
the FDIC to receive dividends from the proceeds of the receivership 
estate of the institution. As is currently the case, the FDIC as 
manager of the Deposit Insurance Fund, will be entitled to receive 
dividends in the deposit class for that portion of the account. (See 12 
U.S.C. 1821(d)(11)(A)(ii)). Similarly, the FDIC would be entitled to 
receive dividends from the receiver for assuming its obligation with 
regard to the uninsured portion of the guaranteed transactional deposit 
accounts.
    As it does in satisfying claims for insured deposits, the FDIC will 
rely on the books and records of the insured depository institution to 
establish ownership and coverage for payment of deposits subject to the 
Transaction Account Guarantee Program. In making its determination 
about what amounts are guaranteed, the FDIC will be entitled to the 
same discretion it has under section 11(f)(2) of the FDI Act (12 U.S.C. 
1821(f)(2)), in requiring the depositor to file a proof of claim (POC). 
The FDIC does not anticipate that a POC will be required during the 
normal course of guarantee determination and payment pursuant to the 
Transaction Account Guarantee Program, but situations requiring a POC 
to be filed may arise. The FDIC's determination of the guaranteed 
amount will be final and will be considered a final administrative 
determination subject to judicial review in accordance with Chapter 7 
of Title 5, similar to that provided for in sections 11(f)(4) and (5) 
of the FDI Act (12 U.S.C. 1821(f)(4) and (5)), regarding judicial 
review of insured deposit claims. A noninterest-bearing transaction 
account depositor may seek judicial review of the FDIC's determination 
on payment of the guaranteed amount in the United States district court 
for the federal judicial district where the principal place of business 
of the depository institution is located within 60 days of the date on 
which the FDIC's final determination is issued.

E. Payment of Claims by the FDIC Pursuant to the Debt Guarantee 
Program: Insured Depository Institution Debt

    Pursuant to the Debt Guarantee Program the FDIC will guarantee 
senior unsecured debt, as that term is defined, for institutions that 
have chosen to participate in the Debt Guarantee Program. The FDIC's 
obligation to make payment, in its capacity as guarantor of senior 
unsecured debt issued by participating insured depository institutions, 
arises upon the failure of a participating insured depository 
institution. The FDIC will use the well-established receivership claims 
process to process guarantee requests. The FDIC will not consider any 
evidence provided by the debt holder that is not presented to the FDIC 
within 90 days of the publication of the claims notice by the receiver 
for the failed institution. The FDIC anticipates that many debt 
holders, particularly sellers of federal funds, will be paid on the 
next business day immediately following the failure of an insured 
depository institution. In all instances, the FDIC commits to pay 
claims related to its debt guarantee expeditiously and will strive to 
make payment on the next business day after the claim is determined to 
be valid. .
    The FDIC will be subrogated to the rights of any creditor it pays 
under the program.

F. Payment of Claims by the FDIC Pursuant to the Debt Guarantee 
Program: Holding Company Debt

    With respect to senior unsecured debt of holding companies eligible 
for payment based on the Debt Guarantee Program, when the holding 
company files for bankruptcy protection, the FDIC will make payment to 
the debt holder for the principal amount of the debt and interest to 
the date of the filing of a bankruptcy petition by the issuing 
institution. As with claims for debt issued by insured depository 
institutions, the FDIC will strive to expedite the claims payment 
process, but the FDIC generally will not make payment on the guaranteed 
amount for a debt asserted against a bankruptcy estate, unless and 
until the claim for the unsecured senior debt has been determined to be 
an allowed claim against the bankruptcy estate and such claim in not 
subject to reconsideration under 11 U.S.C. 502(j). If the FDIC does not 
pay eligible guaranteed debt within one business day of the filing of a 
bankruptcy petition with respect to a participating bank or savings and 
loan holding company, the FDIC will pay interest until payment is made 
on the eligible debt at the 90-day T-bill rate in effect when the 
bankruptcy petition was filed.
    To properly establish ownership and coverage under this aspect of 
the TLG Program, the FDIC normally will require the holder to file a 
POC within 90 days of the published bar date of the bankruptcy 
proceeding. The FDIC may also consider the books and records of the 
holding company and its affiliates to determine the holder of the 
unsecured senior debt and the amount eligible for payment under the 
Debt Guarantee Program. The holder of the unsecured

[[Page 64185]]

senior debt of a holding company will also be required to timely file a 
bankruptcy POC against the holding company's bankruptcy estate and to 
present evidence of such timely filed bankruptcy POC in order to be 
eligible for a debt guarantee payment under the TLG Program.
    To receive payment under the Debt Guarantee Program, the holder of 
the unsecured senior debt shall be required to assign its rights, title 
and interest in the unsecured senior debt to the FDIC and to transfer 
its validated claim in bankruptcy to the FDIC. This assignment shall 
include the right of the FDIC to receive principal and interest 
payments on the unsecured senior debt from the proceeds of the 
bankruptcy estate of the holding company. If the holder of the 
unsecured senior debt receives any distribution from the bankruptcy 
estate prior to the FDIC's payment under the guarantee, the guaranteed 
amount paid by the FDIC shall be reduced by the amount the holder has 
received in the distribution from the bankruptcy estate. In the case of 
a bankruptcy estate, the FDIC as assignee of the unsecured senior debt 
shall be entitled to receive distributions from the liquidation or 
other resolution of the bankruptcy estate in accordance with 11 U.S.C. 
726 or a confirmed plan of reorganization or liquidation in accordance 
with 11 U.S.C. 1129. The POC must be filed with the FDIC within 90 days 
of the published bar date of the bankruptcy proceeding.

Request for Comments

    The FDIC invites comments on all aspects of the Temporary Liquidity 
Guarantee Program as described in the Interim Rule and suggestions for 
its implementation.
    In particular, the FDIC specifically requests suggestions on ways 
in which the claims process for the Debt Guarantee Program may be 
modified to speed payment to eligible claimants without putting at risk 
the funds administered by the FDIC.
    Negotiable order of withdrawal (NOW) accounts are excepted from the 
definition of definition of ``noninterest-bearing transaction account'' 
in the Interim Rule. Should the definition be modified and the FDIC's 
transaction guarantee be extended to include coverage for NOW accounts 
held by sole proprietorships, non-profit religious, philanthropic, 
charitable organizations and the like, or governmental units for the 
deposit of public funds if the interest paid is de minimis?
    The Interim Rule provides for a number of disclosures relative to 
the FDIC's Debt Guarantee Program. Does the certainty of payment 
provided by the required disclosures to lenders and creditors outweigh 
the burden on participating entities in providing the disclosures? Are 
there alternative, less burdensome ways to achieve the same result and 
foster creditor confidence in the Debt Guarantee Program?

Regulatory Analysis and Procedure

A. Administrative Procedure Act

    Pursuant to section 553(b)(B) of the Administrative Procedure Act 
(APA), notice and comment are not required prior to the issuance of a 
final rule if an agency for good cause finds that notice and public 
procedure thereon are impracticable, unnecessary, or contrary to the 
public interest. In addition, section 553(d)(3) of the APA provides 
that an agency, for good cause found and published with the rule, does 
not have to comply with the requirements that a final rule be published 
not less than 30 days before its effective date. The FDIC finds good 
cause to adopt this Interim Rule without prior notice and comment and 
without the 30-day delayed effective date.
    The FDIC's finding is based upon the severe financial conditions 
that threaten the stability of the nation's economy generally and the 
banking system in particular, the serious adverse effects on economic 
conditions and financial stability that would result from any delay of 
the effective date of the Interim Rule, and the fact that the Temporary 
Liquidity Guarantee Program became effective on October 14, 2008. 
Nevertheless, the FDIC desires to have the benefit of public comment 
before adopting a permanent final rule and thus invites interested 
parties to submit comments during a 15-day comment period. The 15-day 
comment period will allow the FDIC to receive comments in a timely 
manner and provide the industry with a final rule as quickly as 
possible, given the Interim Rule's October 23, 2008, effective date. In 
adopting the final regulation, the FDIC will revise the Interim Rule, 
if appropriate, in light of the comments received on the Interim Rule.

B. Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
requires that any new rule prescribed by a Federal banking agency that 
imposes additional reporting, disclosures, or other new requirements on 
insured depository institutions take effect on the first day of a 
calendar quarter unless the agency determines, for good cause published 
with the rule, that the rule should become effective before such 
time.\4\ Based upon the severe financial conditions that threaten the 
stability of the nation's economy generally and the banking system in 
particular, the serious adverse effects on economic conditions and 
financial stability that would result from any delay of the effective 
date of the Interim Rule, and the fact that the Temporary Liquidity 
Guarantee Program has been in effect since October 14, 2008, the FDIC 
invokes the good cause exception to make the Interim Rule effective on 
October 23, 2008.
---------------------------------------------------------------------------

    \4\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the Interim 
Rule is not a ``major rule'' within the meaning of the relevant 
sections of the Small Business Regulatory Enforcement Act of 1996 
(SBREFA), 5 U.S.C. 801 et seq. As required by SBREFA, the FDIC will 
file the appropriate reports with Congress and the General Accounting 
Office so that the rule may be reviewed.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires an agency that is 
issuing a proposed rule to prepare and make available for public 
comment an initial regulatory flexibility analysis that describes the 
impact of a proposed rule on small entities. Because this rulemaking 
does not involve the issuance of a notice of proposed rulemaking, the 
requirements of the RFA do not apply.

E. Paperwork Reduction Act

    This interim rule contains information collection requirements 
subject to the Paperwork Reduction Act (PRA). The FDIC has submitted a 
request for review and approval of a collection of information under 
the emergency processing procedures in Office of Management and Budget 
(OMB) regulation, 5 CFR 1320.13. The FDIC is requesting approval by 
October 23, 2008, of reporting requirements on amounts of senior 
unsecured debt, decisions to opt in or opt out of the TLG Program or 
either of its components, issuance of guaranteed debt and debt holder 
guarantee claims against a receivership; disclosure requirements 
regarding participation in the debt guarantee component, participation 
in the transaction account guarantee component, and termination of 
participation in the TLG Program.
    These reporting and disclosure requirements are needed immediately 
to facilitate the FDIC's administration of

[[Page 64186]]

the Temporary Liquidity Guarantee Program and to ensure notice to the 
public about which entities are participating in the program. The use 
of emergency clearance procedures is necessary because of the sudden, 
unanticipated systemic risks posed to the nation's financial system by 
recent economic conditions and because public harm is reasonably likely 
to result if liquidity is not restored to financial markets. The burden 
for reporting requirements on the amount of uninsured deposits and 
reporting and recordkeeping requirements will be accounted for, as 
appropriate, by an amendment to Consolidated Reports of Condition and 
Income (OMB No. 3064-0052) and Thrift Financial Reports or by 
adjustments to the information collection for this interim rule.
    The proposed burden estimate is as follows:
    Title: Temporary Liquidity Guarantee Program.
    OMB Number: New collection.
    Frequency of Response:
    Initial report of amount of senior unsecured debt--once.
    Subsequent reports on amount of senior unsecured debt--4.
    Opt-out/opt-in notice--once.
    Notice of debt guarantee--once.
    Notice of transaction account guarantee--once.
    Notice of issuance of debt guarantee--26 to 250.
    Notice of termination of participation--once.
    Debt-holder guarantee claims--once.
    Bankruptcy POC/evidence of POC--once.
    Affected Public: FDIC-insured depository institutions, thrift 
holding companies, bank and financial holding companies.
    Estimated Number of Respondents:
    Initial report of amount of senior unsecured debt--14,400.
    Subsequent reports on amount of senior unsecured debt--14,400.
    Opt-out/opt-in notice--1,600.
    Notice of debt guarantee--9,150.
    Notice of transaction account guarantee--8,000.
    Notice of issuance of debt guarantee--13,650.
    Notice of termination of participation--300.
    Debt-holder guarantee claims--2,300.
    Bankruptcy POC/evidence of POC--300.
    Average time per response:
    Initial report of amount of senior unsecured debt--1 hour.
    Subsequent reports on amount of senior unsecured debt hour--1.
    Opt-out/opt-in notice--0.5 hour.
    Notice of debt guarantee--1 to 2 hours.
    Notice of transaction account guarantee--2 hours.
    Notice of issuance of debt guarantee--0.5 to 3 hours.
    Notice of termination of participation--3 hours.
    Debt-holder guarantee claims--3 hours.
    Bankruptcy POC/evidence of POC--1 hour.
    Estimated Annual Burden:
    Initial report of amount of senior unsecured debt--14,400 hours.
    Subsequent reports on amount of senior unsecured debt--57,600 
hours.
    Opt-out/opt-in notice--800 hours.
    Notice of debt guarantee--15,300 hours.
    Notice of transaction account guarantee--16,000 hours.
    Notice of issuance of debt guarantee--2,086,900 hours.
    Notice of termination of participation--900 hours.
    Debt-holder guarantee claims--6,900 hours.
    Bankruptcy POC/evidence of POC--300 hours.
    Total annual burden--2,199,100 hours.
    The FDIC plans to follow this emergency request with a request for 
standard 3-year approval. Although this program, including most of the 
burden on participating entities, will be largely ended by the end of 
2009, a few elements will be ongoing until 2012. The request will be 
processed under OMB's normal clearance procedures in accordance with 
the provisions of OMB regulation 5 CFR 1320.10. To facilitate 
processing of the emergency and normal clearance submissions to OMB, 
the FDIC invites the general public to comment on: (1) Whether this 
collection of information is necessary for the proper performance of 
the FDIC's functions, including whether the information has practical 
utility; (2) the accuracy of the estimates of the burden of the 
information collection, including the validity of the methodologies and 
assumptions used; (3) ways to enhance the quality, utility, and clarity 
of the information to be collected; and (4) ways to minimize the burden 
of the information collection on respondents, including through the use 
of automated collection techniques or other forms of information 
technology; and (5) estimates of capital or start up costs, and costs 
of operation, maintenance and purchase of services to provide the 
information.

List of Subjects in 12 CFR Part 370

    Banks, Banking, Bank deposit insurance, Holding companies, National 
banks, Reporting and recordkeeping requirements, Savings associations.

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation amends title 12 of the Code of Federal 
Regulations by adding new Part 370 as follows:

PART 370--TEMPORARY LIQUIDITY GUARANTEE PROGRAM

Sec.
370.1 Scope.
370.2 Definitions.
370.3 Debt Guarantee Program.
370.4 Transaction Account Guarantee Program.
370.5 Participation.
370.6 Assessments under the Debt Guarantee Program.
370.7 Assessments for the Transaction Account Guarantee Program.
370.8 Systemic Risk Emergency Special Assessment to recover loss.
370.9 Recordkeeping requirements.
370.10 Oversight.
370.11 Enforcement mechanisms.
370.12 Payment of claims.

    Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818, 
1819(a)(Tenth); 1820(f), 1821(a); 1821(c); 1821(d); 1823(c)(4).

Sec.  370.1  Scope.

0
This part sets forth the eligibility, limitations, procedures, 
requirements, and other provisions related to participation in the 
FDIC's temporary liquidity guarantee program.


Sec.  370.2  Definitions.

    As used in this part, the terms listed in this section are defined 
as indicated below. Other terms used in this part that are defined in 
the Federal Deposit Insurance Act (FDI Act) have the meanings given 
them in the FDI Act except as otherwise provided herein.
    (a) Eligible entity. The term ``eligible entity'' means any of the 
following:
    (1) An insured depository institution;
    (2) A U.S. bank holding company, provided that it has at least one 
chartered and operating insured depository institution within its 
holding company structure;
    (3) A U.S. savings and loan holding company, provided that it has 
at least one chartered and operating insured depository institution 
within its holding company structure or
    (4) Other affiliates of insured depository institutions that the 
FDIC after consultation with the appropriate Federal banking agency, 
designates as eligible entities which affiliates, by seeking and 
obtaining such designation, will have opted in to the debt guarantee 
program.
    (b) Insured Depository Institution. The term ``insured depository 
institution'' means an insured depository institution as defined in 
section 3(c)(2) of the FDI

[[Page 64187]]

Act, 12 U.S.C. 1813(c)(2), except that it does not include an ``insured 
branch'' of a foreign bank as defined in section 3(s)(3) of the FDI 
Act, 12 U.S.C. 1813(s)(3), for purposes of the debt guarantee program.
    (c) U.S. Bank Holding Company. The term ``U.S. Bank Holding 
Company'' means a ``bank holding company'' as defined in section 2(a) 
of the Bank Holding Company Act of 1956 (``BHCA''), 12 U.S.C. 1841(a), 
that is organized under the laws of any State or the District of 
Columbia.
    (d) U.S. Savings and Loan Holding Company. The term ``U.S. Savings 
and Loan Holding Company'' means a ``savings and loan holding company'' 
as defined in section 10(a)(1)(D) of the Home Owners' Loan Act of 1933 
(``HOLA''), 12 U.S.C. 1467a(a)(1)(D), that is organized under the laws 
of any State or the District of Columbia and either:
    (1) Engages only in activities that are permissible for financial 
holding companies under section 4(k) of the BHCA, 12 U.S.C.1843(k), or
    (2) Has at least one insured depository institution subsidiary that 
is the subject of an application under section 4(c)(8) of the BHCA, 12 
U.S.C. 1843(c)(8), that was pending on October 13, 2008.
    (e) Senior unsecured debt. The term ``senior unsecured debt'' means 
unsecured borrowing that: Is evidenced by a written agreement; has a 
specified and fixed principal amount to be paid in full on demand or on 
a date certain; is noncontingent; and is not, by its terms, 
subordinated to any other liability.
    (1) Senior unsecured debt includes, for example, federal funds 
purchased, promissory notes, commercial paper, unsubordinated unsecured 
notes, certificates of deposit standing to the credit of a bank, bank 
deposits in an international banking facility (IBF) of an insured 
depository institution, and Eurodollar deposits standing to the credit 
of a bank. For purposes of this paragraph, the term ``bank'' means an 
insured depository institution or a depository institution regulated by 
a foreign bank supervisory agency.
    (2) Senior unsecured debt may be denominated in foreign currency.
    (3) Senior unsecured debt excludes, for example, obligations from 
guarantees or other contingent liabilities, derivatives, derivative-
linked products, debt paired with any other security, convertible debt, 
capital notes, the unsecured portion of otherwise secured debt, 
negotiable certificates of deposit, and deposits in foreign currency 
and Eurodollar deposits that represent funds swept from individual, 
partnership or corporate accounts held at insured depository 
institutions. Also excluded are loans to affiliates, including parents 
and subsidiaries, and institution affiliated parties.
    (f) Newly issued senior unsecured debt. The term ``newly issued 
senior unsecured debt'' means senior unsecured debt issued by a 
participating entity on or after October 14, 2008, and on or before:
    (1) The earlier of November 12, 2008 or the date an eligible entity 
opts out, for an eligible entity that opts out of the debt guarantee 
program; or
    (2) June 30, 2009, for an eligible entity that does not opt out of 
the debt guarantee program.
    (g) Participating entity. The term ``participating entity'' means:
    (1) For the period from October 14, 2008, through November 12, 
2008, any eligible entity that has not opted out; or
    (2) For the period from November 13, 2008 through June 30, 2012, an 
eligible entity that has not opted out of the debt guarantee program; 
or
    (3) For the period from November 13, 2008 through December 31, 
2009, an eligible entity that has not opted out of the transaction 
account guarantee program.
    (h) Noninterest-bearing transaction account. (1) The term 
``noninterest-bearing transaction account'' means a transaction account 
as defined in 12 CFR 204.2 that is
    (i) Maintained at an insured depository institution;
    (ii) With respect to which interest is neither accrued nor paid; 
and
    (iii) On which the insured depository institution does not reserve 
the right to require advance notice of an intended withdrawal.
    (2) A noninterest-bearing transaction account does not include, for 
example, a negotiable order of withdrawal (NOW) account or money market 
deposit account (MMDA) as those accounts are defined in 12 CFR 204.2.
    (i) FDIC-Guaranteed debt. The term ``FDIC-guaranteed debt'' means 
senior unsecured debt issued by a participating entity that meets the 
requirements of this part for debt that is guaranteed under the debt 
guarantee program, and is clearly identified as ``guaranteed by the 
FDIC.''
    (j) Debt guarantee program. The term ``debt guarantee program'' 
refers to the protections afforded newly issued senior unsecured debt 
as described in this part.
    (k) Transaction account guarantee program. The term ``transaction 
account guarantee program'' refers to the protections afforded funds in 
noninterest-bearing transaction accounts as described in this part.
    (l) Temporary liquidity guarantee program. The term ``temporary 
liquidity guarantee program'' includes both the debt guarantee program 
and the transaction account guarantee program.


Sec.  370.3  Debt Guarantee Program.

    (a) Upon the failure of a participating entity that is an insured 
depository institution or the filing of a petition in bankruptcy with 
respect to any other participating entity, and subject to the other 
provisions of this part, the FDIC guarantees payment of the unpaid 
principal and contract interest accrued to the date of failure or 
bankruptcy, as appropriate, of all FDIC-guaranteed debt issued by the 
participating entity during the period from October 14, 2008, through 
June 30, 2009, provided that the FDIC will pay interest at the 90-day 
T-Bill bill rate if there is a delay in payment beyond the next 
business day after the failure of the institution or the date of filing 
of the bankruptcy petition, respectively.
    (b) Absent action by the FDIC, the maximum amount of debt to be 
issued under the guarantee is 125 percent of the par value of the 
participating entity's senior unsecured debt, excluding debt extended 
to affiliates or institution affiliated parties, outstanding as of 
September 30, 2008 that was scheduled to mature on or before June 30, 
2009. Under certain circumstances and subject to certain conditions, 
including disclosure requirements, a participating entity may issue 
senior unsecured debt that is not subject to the guarantee. If the 
participating entity issues debt identified as ``guaranteed by the 
FDIC'' in excess of its maximum amount, it will become subject to 
assessment increases as provided in Sec.  370.6(e). The FDIC may make 
exceptions to this guarantee limit, for example, allow a participating 
entity to exceed the 125 percent guarantee limit, restrict a 
participating entity to less than 125 percent, and/or impose other 
limits or requirements. If a participating entity had no senior 
unsecured debt on September 30, 2008, the entity may seek to have some 
amount of debt covered by the debt guarantee program. The FDIC, after 
consultation with the appropriate Federal banking agency, will decide 
whether, and to what extent, such requests will be granted on a case-
by-case basis.
    (1) Each participating entity shall calculate the amount of its 
senior unsecured debt outstanding as of September 30, 2008 excluding 
debt extended to affiliates, that was scheduled to mature on or before 
June 30, 2009, using the definitions described in this regulation.

[[Page 64188]]

    (2) Each participating entity will report the calculated amount to 
the FDIC, even if such amount is zero, in an approved format via 
FDICconnect no later than November 12, 2008.
    (3) Each subsequent report to the FDIC concerning debt issuances or 
balances outstanding will state whether the eligible institution has 
issued guaranteed debt that exceeded its limits at any time since the 
previous reporting period.
    (4) All reports subject to this section will contain a 
certification from the eligible institution's Chief Financial Officer 
(CFO) or equivalent certifying the accuracy of the information 
reported.
    (c) For FDIC-guaranteed debt issued on or before June 30, 2009, the 
FDIC's guarantee will terminate on the earlier of the maturity of the 
debt or June 30, 2012.
    (d) Debt cannot be issued and identified as guaranteed by the FDIC 
if:
    (1) The proceeds are used to prepay debt that is not FDIC-
guaranteed;
    (2) The issuing entity has previously opted out of the debt 
guarantee program;
    (3) The issuing entity has had its participation in the debt 
guarantee program terminated by the FDIC;
    (4) The issuing entity has exceeded its authorized limit for 
issuing guaranteed debt as specified in paragraph (b) of this section,
    (5) The debt does not otherwise meet the requirements of this part; 
or
    (6) The debt is extended to an affiliate, an insider of the 
participating entity, or an insider of an affiliate without FDIC 
approval of the guarantee.
    (e) The FDIC's agreement to include a participating entity's senior 
unsecured debt in the debt guarantee program does not exempt the entity 
from complying with any applicable law including, without limitation, 
Securities and Exchange Commission registration or disclosure 
requirements that would be applicable if the entity or liability were 
not included in the program.
    (f) Long term non-guaranteed debt option. On or before 11:59 p.m., 
Eastern Standard Time, November 12, 2008 a participating entity may 
also notify the FDIC that it has elected to issue non-guaranteed debt 
with maturities beyond June 30, 2012, at any time, in any amount, and 
without regard to the guarantee limit. By making this election the 
participating entity agrees to pay to the FDIC the nonrefundable fee as 
provided in Sec.  370.6(f).


Sec.  370.4  Transaction Account Guarantee Program.

    (a) In addition to the coverage afforded to depositors under 12 CFR 
Part 330, a depositor's funds in a noninterest-bearing transaction 
account maintained at a participating entity that is an insured 
depository institution are insured in full (irrespective of the 
standard maximum deposit insurance amount defined in 12 CFR 330.1(n)) 
from October 14, 2008, through the earlier of:
    (1) The date of opt-out, if the entity opted out, or
    (2) December 31, 2009.
    (b) In determining whether funds are in a noninterest-bearing 
transaction account for purposes of this section, the FDIC will apply 
its normal rules and procedures under Sec.  360.8 (12 CFR 360.8) for 
determining account balances at a failed insured depository 
institution. Under these procedures, funds may be swept or transferred 
from a noninterest-bearing transaction account to another type of 
deposit or nondeposit account. Unless the funds are in a noninterest-
bearing transaction account after the completion of a sweep under Sec.  
360.8, the funds will not be guaranteed under the transaction account 
guarantee program.
    (c) Notwithstanding paragraph (b) of this section, in the case of 
funds swept from a noninterest-bearing transaction account to a 
noninterest-bearing savings deposit account, the FDIC will treat the 
swept funds as being in a noninterest-bearing transaction account. As a 
result of this treatment, the funds swept from a noninterest-bearing 
transaction account to a noninterest-bearing savings account will be 
guaranteed under the transaction account guarantee program.


Sec.  370.5  Participation.

    (a) Initial period. All eligible entities are covered under the 
temporary liquidity guarantee program for the period from October 14, 
2008 through November 12, 2008, unless they opt out on or before 
November 12, 2008 in which case the coverage ends on the date of the 
opt-out.
    (b) The issuance of FDIC-guaranteed debt subject to the protections 
of the debt guarantee program is an affirmative action by a 
participating entity that constitutes its agreement to be:
    (1) Bound by the terms and conditions of the program, including 
without limitation, being subject to the assessments provided herein;
    (2) Subject to and to comply with any FDIC request to provide 
information relevant to participation in the debt guarantee program and 
to be subject to FDIC on-site reviews as needed after consultation with 
the appropriate Federal banking agency to determine compliance with the 
terms and requirements of the debt guarantee program; and
    (3) Bound by the FDIC's decisions, in consultation with the 
appropriate Federal banking agency, regarding the management of the 
temporary liquidity guarantee program.
    (c) Opt-out and Opt-In Options. From October 14, 2008 through 
November 12, 2008 each eligible entity is a participating entity in 
both the debt guarantee program and the transaction account guarantee 
program, unless the entity opts out. No later than 11:59 p.m., Eastern 
Standard Time, November 12, 2008, each eligible entity must inform the 
FDIC if it desires to opt out of the debt guarantee program or the 
transaction account guarantee program, or both. Failure to opt out by 
11:59 p.m., Eastern Standard Time, November 12, 2008 constitutes a 
decision to continue in the program after that date. Prior to November 
12, 2008 an eligible entity may inform the FDIC that it will not opt 
out of either or both programs (opt in).
    (d) An eligible entity may elect to opt out of either the 
guaranteed debt program or the transaction account guarantee program or 
both. The choice to opt out, once made, is irrevocable. Similarly, the 
choice to affirmatively opt in, as provided in Sec.  370.5(c), once 
made, is irrevocable.
    (e) All eligible entities within a U.S. bank holding company group 
or U.S. savings and loan holding company group must make the same 
decision regarding continued participation in each guarantee program; 
failure to do so constitutes an opt out by all members of the group.
    (f) Eligible entities that do not opt out on or before November 12, 
2008 will not be able to select which newly issued senior unsecured 
debt is guaranteed debt; all senior unsecured debt issued by a 
participating entity up to the guarantee limit will become guaranteed 
debt as and when issued, subject to Sec.  370.3(f).
    (g) Procedures for Opting Out. The FDIC will provide procedures for 
opting out and for making an affirmative decision to opt in using 
FDIC's secure e-business Web site, FDICconnect. Entities that are not 
insured depository institutions will select and solely use an 
affiliated insured depository institution to submit their opt-out 
election and to make any assessment payments required under the 
temporary liquidity guarantee program.
    (h) Disclosures regarding participation in the temporary liquidity 
guarantee program.
    (1) The FDIC will publish on its Web site:

[[Page 64189]]

    (i) A list of the eligible entities that have opted out of the debt 
guarantee program and
    (ii) A list of the eligible entities that have opted out of the 
transaction account guarantee program.
    (2) If an eligible entity does not opt out of the debt guarantee 
program, it must clearly identify, in writing and in a commercially 
reasonable manner, to any interested lender or creditor whether the 
newly issued debt it is offering is guaranteed or not.
    (3) Each eligible entity that is an insured depository institution 
must post a prominent notice in the lobby of its main office and each 
branch clearly indicating whether the entity is participating in the 
transaction account guarantee program, i.e., whether it has opted out. 
If the entity is participating in the transaction account guarantee 
program, the notice must also state that funds held in noninterest-
bearing transactions accounts at the entity are insured in full by the 
FDIC.
    (i) These disclosures must be provided in simple, readily 
understandable text.
    (ii) If the institution uses sweep arrangements or takes other 
actions that result in funds being transferred or reclassified to an 
interest-bearing account or nontransaction account, the institution 
must disclose those actions to the affected customers and clearly 
advise them, in writing, that such actions will void the FDIC's 
guarantee.
    (4) Effective date for paragraph (2) and (3) of paragraph (h). 
Paragraphs (h)(2) and (h)(3) of this section are effective December 1, 
2008. Prior to that date, eligible entities should provide adequate 
disclosures of the substance of paragraphs (h)(2) and (h)(3) in a 
commercially reasonable manner.
    (i) Continued Eligibility. The FDIC will determine eligibility in 
consultation with the eligible entity's appropriate Federal banking 
agency.
    (1) Participation by an entity organized after the expiration of 
the opt-out period will be considered by the FDIC on a case-by-case 
basis in consultation with the entity's appropriate Federal banking 
agency.
    (2) An eligible entity that is not an insured depository 
institution will no longer be eligible to participate in the debt 
guarantee program once it is no longer affiliated with a chartered and 
operating insured depository institution.
    (j) Duration--(1) Coverage for guaranteed debt. The ability of 
participating entities to issue guaranteed debt under the debt 
guarantee program expires on June 30, 2009. For guaranteed debt issued 
on or before June 30, 2009, coverage would only be provided until the 
earlier of the maturity of the liability or June 30, 2012.
    (2) Coverage for noninterest-bearing transaction accounts. Funds 
held in noninterest-bearing transaction accounts at eligible entities 
will be guaranteed from October 14, 2008 through November 12, 2008. If 
the eligible entity does not opt-out of the transaction account 
guarantee program, the coverage will exist through December 31, 2009.


Sec.  370.6  Assessments under the Debt Guarantee Program.

    (a) Waiver of assessment for initial period. No eligible entity 
shall pay any assessment associated with the debt guarantee program for 
the period from October 14, 2008, through November 12, 2008.
    (b) Notice to the FDIC. No debt shall be considered guaranteed 
under the FDIC's debt guarantee program unless notice of the issuance 
of such debt and payment of associated assessments is provided to the 
FDIC as required in paragraph (d) of this section.
    (1) Any eligible entity that does not opt out of the Debt Guarantee 
Program by November 12, 2008, as provided in Sec.  370.5, and issued 
any guaranteed debt during the period from October 14, 2008 through 
November 12, 2008 that was still outstanding on November 12, 2008, 
shall notify the FDIC of that issuance via the FDIC's e-business Web 
site FDICconnect by December 1, 2008, and the eligible entity's Chief 
Financial Officer or equivalent shall certify that the issuances 
outstanding at each point of time did not exceed the guaranteed amount 
limit as set forth in Sec.  370.3.
    (2) Any eligible entity that does not opt out of the program and 
that issues guaranteed debt after November 12, 2008, shall notify the 
FDIC of that issuance via the FDIC's e-business Web site FDICconnect 
within the time period specified by the FDIC. The eligible entity's 
Chief Financial Officer or equivalent shall certify that the issuance 
of guaranteed debt does not exceed the guarantee limit as set forth in 
Sec.  370.3.
    (3) The eligible entity shall be required to provide certification 
that the issuance does not exceed the guaranteed amount limit as set 
forth in Sec.  370.3.
    (4) The FDIC will provide procedures governing notice to the FDIC 
and certification of guaranteed amount limits for purposes of this 
section.
    (c) Initiation of assessments. Beginning on November 13, 2008, any 
eligible entity that has chosen not to opt out of the debt guarantee 
program as provided in this part, will be charged assessments as set 
forth in this section.
    (d) Amount of assessments for debt within the guarantee limit--(1) 
Calculation of assessment. The amount of assessment will be determined 
by multiplying the amount of eligible guaranteed debt times the term of 
the debt times an annualized 75 basis points. If the debt matures after 
June 30, 2012, June 30, 2012 will be used as the maturity date.
    (2) Assessment invoicing. Once the participating entity provides 
notice as required in paragraphs (b)(1) and (b)(2) of this section, the 
invoice for the appropriate fee will be automatically generated and 
posted on FDICconnect for the account associated with the participating 
entity, and the time limits for providing payment in paragraph (e)(1) 
of this section will apply.
    (3) No assessment reduction for early retirement of guaranteed 
debt. A participating entity's assessment shall not be reduced if 
guaranteed debt is retired prior to its scheduled maturity date.
    (e) Increased assessments for debt exceeding the Guarantee Limit. 
Any participating entity that issues guaranteed debt represented as 
being ``guaranteed by the FDIC'' exceeding its guaranteed amount limit 
as set forth in Sec.  370.3(b) shall have its assessment rate for all 
outstanding guaranteed debt increased to 150 basis points for purposes 
of the calculations in paragraphs (d)(1) of this section. In addition, 
any entity making such a misrepresentation may also be subject to 
enforcement action including civil money penalties under 12 U.S.C. 
1818.
    (f) Long term non-guaranteed debt fee. Each participating entity 
that elects to issue long term non-guaranteed debt pursuant to Sec.  
370.3(f) must pay the FDIC a nonrefundable fee equal to 37.5 basis 
points times the amount of the entity's senior unsecured debt (other 
than debt owed to affiliates) with a maturity date on or before June 
30, 2009, outstanding as of September 30, 2008.
    (1) The nonrefundable fee will be collected in six equal monthly 
installments.
    (2) An entity electing the nonrefundable fee option will also be 
billed as it issues guaranteed debt under the debt guarantee program, 
and the amounts paid as a nonrefundable fee will be applied to offset 
these bills until the nonrefundable fee is exhausted.
    (3) Thereafter, the institution will have to pay additional 
assessments on guaranteed debt as it issues the debt
    (g) Collection of assessments--ACH Debit. Each participating entity 
shall take all actions necessary to allow the Corporation to debit 
assessments from the participating entity's designated

[[Page 64190]]

deposit account as provided for in Sec.  327.3(a)(2). Each 
participating entity shall ensure that funds in an amount at least 
equal to the amount of the assessment are available in the designated 
account for direct debit by the Corporation on the first business day 
after posting of the invoice on FDICconnect. Failure to take any such 
action or to provide such funding of the account shall be deemed to 
constitute nonpayment of the assessment, and such failure by any 
participating entity will be subject to the penalties for failure to 
timely pay assessments as provided for at Sec.  308.132(c)(3)(v).


Sec.  370.7  Assessment for the Transaction Account Guarantee Program.

    (a) Waiver of assessment for initial period. No eligible entity 
shall pay any assessment associated with the transaction account 
guarantee program for the period from October 14, 2008, through 
November 12, 2008.
    (b) Initiation of assessment. For the period beginning on November 
13, 2008, and continuing through December 31, 2009, any eligible entity 
that has not notified the FDIC that it has opted out of the transaction 
account guarantee program as provided in Sec.  370.5, will be subject 
to an assessment that will be reflected on its quarterly certified 
statement invoices.
    (c) Amount of assessment. Any eligible entity that does not opt out 
of the transaction account guarantee program shall pay quarterly an 
annualized 10 basis point assessment on any deposit amounts exceeding 
the existing deposit insurance limit of $250,000, as reported on its 
quarterly Reports of Condition and Income or Thrift Financial Report in 
any noninterest-bearing transaction accounts (as defined in Sec.  
370.2(h), including any such amounts swept from a noninterest bearing 
transaction account into an noninterest bearing savings deposit account 
as provided in Sec.  370.4(c). This assessment shall be in addition to 
an institution's risk-based assessment imposed under Part 327.
    (d) Collection of assessment. Assessments for the transaction 
account guarantee program shall be collected along with a participating 
entity's quarterly deposit insurance payment as provided in Sec.  
327.3, and subject to penalties for failure to timely pay assessments 
as referenced in Sec.  308.132(c)(3)(v).


Sec.  370.8  Systemic Risk Emergency Special Assessment to recover 
loss.

    To the extent that the assessments provided under Sec.  370.6 or 
Sec.  370.7 are insufficient to cover any loss or expenses arising from 
the temporary liquidity guarantee program, the Corporation shall impose 
an emergency special assessment on insured depository institutions as 
provided under 12 U.S.C. 1823(c)(4)(G)(ii) of the FDI Act.


Sec.  370.9  Recordkeeping requirements.

    The FDIC will establish procedures, require reports, and require 
participating entities to provide and preserve any information needed 
for the operation of this program.


Sec.  370.10  Oversight.

    (a) Oversight. Participating entities availing themselves of the 
temporary liquidity guarantee program are subject to the FDIC's 
oversight regarding compliance with the terms of the temporary 
liquidity guarantee program.
    (b) By issuing guaranteed debt, and not opting out of the temporary 
liquidity guarantee program, all participating entities agree, for the 
duration of the temporary liquidity guarantee program, to be subject to 
the FDIC's authority to determine compliance with the provisions and 
requirements of the program.


Sec.  370.11  Enforcement Mechanisms.

    (a) Termination of Participation. If the FDIC, in its discretion, 
after consultation with the participating entity's appropriate Federal 
banking agency, determines that the participating entity should no 
longer be permitted to continue to participate in the temporary 
liquidity guarantee program, the FDIC will inform the entity that it 
will no longer be provided the protections of the temporary liquidity 
guarantee program.
    (1) Termination of participation in the temporary liquidity 
guarantee program will solely have prospective effects. All previously 
issued guaranteed debt will continue to be guaranteed as set forth in 
this part.
    (2) The FDIC will work with the participating entity and its 
appropriate Federal banking agency to assure that the entity notifies 
its customers and lenders or creditors that its participation in the 
temporary liquidity guarantee program has ended.
    (b) Enforcement Actions. Violating the terms or requirements of the 
temporary liquidity guarantee program set forth in this part 
constitutes a violation of a regulation and subjects the participating 
entity to enforcement actions under Section 8 of the FDI Act (12 U.S.C. 
1818), including the assessment of civil money penalties under section 
8(i) of the FDI Act (12 U.S.C. 1818(i)). The appropriate Federal 
banking agency for the participating entity will consult with the FDIC 
in enforcing the provisions of this part. The appropriate Federal 
banking agency and the FDIC also have enforcement authority under 12 
U.S.C. 1828(a)(4)(C) to pursue an enforcement action if a person 
knowingly misrepresents that any deposit liability, obligation, 
certificate, or share is insured when it is not in fact insured.


Sec.  370.12  Payment of Claims.

    (a) Claims for Deposits in Guaranteed Transaction Accounts.
    (1) In general. The FDIC will pay guaranteed claims of depositors 
who hold noninterest-bearing transaction deposit accounts in an insured 
depository institution that is a participating entity as soon as 
possible upon the failure of the entity. Unless otherwise provided for 
in this subsection, the guaranteed claims of depositors who hold 
noninterest-bearing transaction deposit accounts in such entities will 
be paid in accordance with 12 U.S.C. 1821(f) and 12 CFR 330.
    (2) Subrogation rights of FDIC. Upon payment of such claims, the 
FDIC will be subrogated to the claims of depositors in accordance with 
12 U.S.C. 1821(g).
    (3) Review of final determination. The final determination of the 
amount guaranteed shall be considered a final agency action of the FDIC 
reviewable in accordance with Chapter 7 of Title 5, by the United 
States district court for the federal judicial district where the 
principal place of business of the depository institution is located. 
Any request for review of the final determination shall be filed with 
the appropriate district court not later than sixty (60) days of the 
date on which the final determination is issued.
    (b) Claims for Guaranteed Debt--(1) Guaranteed debt in 
receivership.
    (i) Procedure for claims determination. Holders of debt shall file 
a claim with the receiver of a failed insured depository institution 
that is a participating entity within ninety days after the FDIC 
publishes a notice to creditors of the failed financial institution to 
present claims pursuant to 12 U.S.C. 1821(d)(3)(B). The FDIC will 
consider the proof of claim, if timely filed, and will make a 
determination of the amount guaranteed within 180 days of the filing of 
the proof of claim, unless extended by written agreement between the 
claimant and the FDIC. The determination of the FDIC will be final. The 
FDIC will pay interest at the 90-day T-Bill bill rate if there is a 
delay in payment beyond the next business day after receivership.

[[Page 64191]]

    (ii) Subrogation rights of FDIC. To receive payment under the debt 
guarantee program, the holder of the unsecured senior debt shall assign 
its rights, title and interest in the unsecured senior debt to the FDIC 
and to transfer its validated claim to the FDIC which will be 
subrogated to such rights.
    (iii) Review of final determination. The debt holder shall have the 
right to seek judicial review of the FDIC's final determination of the 
amount guaranteed in the district or territorial court of the United 
States for the district within which the depository institution's 
principal place of business is located or the United States District 
Court for the District of Columbia. The debt holder must file suit on 
such claim before the end of the 60-day period beginning on the date of 
the FDIC's final determination or before the end of the 60-day period 
beginning on the 180th day after the debt holder filed the claim with 
the FDIC, unless extended by mutual agreement, if the FDIC has not made 
a final determination.
    (2) Guaranteed debt of a participating U.S. Bank Holding Company, 
or U.S. Savings and Loan Holding Company or Authorized Affiliates.
    (i) Procedure for claims determination. The holder of the unsecured 
senior debt of a holding company or authorized affiliate must timely 
file a bankruptcy proof of claim (POC) against the company's bankruptcy 
estate and present evidence of such timely filed bankruptcy POC in 
order to be eligible to participate in the TLG Program. The POC must be 
filed with the FDIC within 90 days of the published bar date of the 
bankruptcy proceeding. The claimant shall identify and describe the 
debt it believes is subject to the FDIC guarantee.
    (ii) Payment of claims. The FDIC will make payment to the debt 
holder for the principal amount of the debt and contract interest to 
the date of the filing of a bankruptcy petition with respect to the 
company, provided that the FDIC will pay interest at the 90-day T-Bill 
bill rate if there is a delay in payment beyond the next business day 
after the date of filing of the bankruptcy petition. The FDIC is not 
required to make payment on the guaranteed amount for a debt asserted 
against a bankruptcy estate, unless and until the claim for the 
unsecured senior debt has been determined to be an allowed claim 
against the bankruptcy estate and such claim is not subject to 
reconsideration under 11 U.S.C. 502 (j).
    (iii) Assignment of rights to FDIC. To receive payment under the 
debt guarantee program, the holder of the unsecured senior debt shall 
assign its rights, title and interest in the unsecured senior debt to 
the FDIC and to transfer its allowed claim in bankruptcy to the FDIC. 
This assignment shall include the right of the FDIC to receive 
principal and interest payments on the unsecured senior debt from the 
proceeds of the bankruptcy estate of the holding company. If the holder 
of the unsecured senior debt receives any distribution from the 
bankruptcy estate prior to the FDIC's payment under the guarantee, the 
guaranteed amount paid by the FDIC shall be reduced by the amount the 
holder has received in the distribution from the bankruptcy estate.
    (iv) Final determination. The FDIC's determination of the 
guaranteed amount shall be a final administrative determination subject 
to judicial review.
    (v) Review of final determination. The holder of an unsecured 
senior debt shall have the right to seek judicial review of the FDIC's 
final determination in the United States District Court for the 
District of Columbia or the United State District Court for the federal 
district where the holding company's principal place of business was 
located. Failure of the holder of the unsecured senior debt to seek 
such judicial review within sixty (60) days of the date of the 
rendering of the final determination will deprive the holder of the 
unsecured senior debt of all further rights and remedies with respect 
to the guarantee claim.

    By order of the Board of Directors.

    Dated at Washington, DC, this 23rd day of October, 2008.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8-25739 Filed 10-24-08; 4:15 pm]
BILLING CODE 6714-01-P