[Federal Register Volume 73, Number 217 (Friday, November 7, 2008)]
[Rules and Regulations]
[Pages 66160-66163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26569]


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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: Amendment to the Interim Rule with request for comments.

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SUMMARY: The FDIC is amending its Interim Rule with Request for Comment 
(Interim Rule) relating to implementation of its Temporary Liquidity 
Guarantee Program (TLG Program) by extending the opt out date for 
eligible entities until December 5, 2008; extending the deadline for 
complying with certain disclosure requirements related to the TLG 
Program until December 19, 2008; and establishing assessment procedures 
to accommodate the extended opt out period.

DATES: The Amended Interim Rule becomes effective on November 4, 2008. 
The effective date of Sec.  370.5 paragraphs (h)(2) and (h)(3), added 
at 73 FR 64186, October 29, 2008, is delayed from December 1, 2008 
until December 19, 2008. The FDIC seeks general and specific comments 
relating to questions raised in both the Amended Interim Rule and the 
Interim Rule. Comments regarding both the Amended Interim Rule and the 
Interim Rule must be received by November 13, 2008.

ADDRESSES: You may submit comments on the Amended 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: 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

    The TLG Program was first announced by the FDIC on October 14, 
2008, as an initiative to counter the current system-wide crisis in the 
nation's financial sector. It provided two limited guarantee programs: 
One, that guaranteed newly-issued senior unsecured debt of insured 
depository institutions and most U.S. holding companies of such insured 
depository institutions (the debt guarantee program), and another, that 
guaranteed certain noninterest-bearing transaction accounts at insured 
depository institutions (the transaction account guarantee program).
    The FDIC's action in establishing the TLG Program was preceded by a 
determination of systemic risk by the Secretary of the Treasury (after 
consultation with the President), following receipt of the written 
recommendation of the Board on October 13, 2008, along with a similar 
written recommendation of the Board of Governors of the Federal Reserve 
System.
    The recommendations and eventual determination of systemic risk 
were made in accordance with section 13(c)(4)(G) to the Federal Deposit 
Insurance Act (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 believes that the TLG Program promotes financial 
stability by preserving confidence in the banking system and 
encouraging liquidity in order to ease lending to creditworthy 
businesses and consumers. As a result, on October 23, 2008, the FDIC's 
Board of Directors authorized publication in the Federal Register and 
requested comment regarding an Interim Rule designed to implement the 
TLG Program. The Interim Rule was published on October 29, 2008.\1\ It 
became effective on October 23, 2008, with the exception of certain 
disclosure requirements for which a delayed effective date of December 
1, 2008 was established.\2\ The FDIC requested comments regarding the 
Interim Rule by November 13, 2008.
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    \1\ 73 FR 64179 (Oct. 29, 2008).
    \2\ 12 CFR 370.5(h)(2) and (h)(3).
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II. Opt Out Deadline in the Interim Rule

    The Interim Rule provides that no later than 11:59 p.m. Eastern 
Standard Time (EST), on November 12, 2008, each eligible entity \3\ 
must inform the FDIC if it desires to opt out of the debt guarantee 
component or the transaction account guarantee component (or both 
components) of the TLG Program.\4\ If an eligible entity opts out of 
the TLG Program, coverage under the program ends on the earlier of the 
date of the opt out or on November 12, 2008.\5\ According to the 
Interim Rule, failure to opt out by November 12, 2008 constitutes a 
decision on behalf of an eligible entity to remain in the

[[Page 66161]]

program.\6\ Prior to November 12, 2008, an eligible entity may also 
notify the FDIC that it will not opt out of (that is, that it will opt 
in to) either or both programs.\7\ The choice to opt out or in, once 
made, is irrevocable.\8\
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    \3\ 12 CFR 370.2(a) defines ``eligible entity'' as 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, designate 
as eligible entities which affiliates, by seeking and obtaining such 
designation, will have opted in to the debt guarantee program.
    \4\ 12 CFR 370.5(c).
    \5\ 12 CFR 370.5(a).
    \6\ 12 CFR 370.5(c).
    \7\ Id.
    \8\ 12 CFR 370.5(d).
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    The opt out deadline of November 12, 2008 is referenced in several 
sections of the Interim Rule in describing the scope of the guarantees 
provided by the TLG Program. For example, the Interim Rule provides 
that funds held in noninterest-bearing transaction accounts at eligible 
entities will be guaranteed from October 14, 2008, through November 12, 
2008,\9\ and that 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 \10\ is guaranteed debt under the Debt Guarantee 
Program.\11\
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    \9\ 12 CFR 370.5(j)(2).
    \10\ 12 CFR 370.2(f) defines ``newly issued senior unsecured 
debt'' as 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.
    \11\ 12 CFR 370.5(f). The limitations of this provision are 
subject to 12 CFR 370.3(f), describing the long term non-guaranteed 
debt option.
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    Significantly, in the Interim Rule calculations involving 
assessments charged to an eligible entity for its participation in the 
TLG Program are related to the November 12, 2008 opt out date. For 
example, the Interim Rule permits eligible entities to participate in 
both components of the TLG Program from October 14, 2008, through 
November 12, 2008, at no cost to the entities.\12\
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    \12\ 12 CFR 370.6(a) and 370.7(a).
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    With respect to the Debt Guarantee Program, the Interim Rule 
requires an eligible entity that does not opt out of the program by the 
opt out date of November 12, 2008, and that issues guaranteed debt 
during the period from October 14, 2008, through November 12, 2008 that 
was still outstanding on November 12, 2008, to notify the FDIC and 
certify that the issuances that it made did not exceed the guaranteed 
limit.\13\ (An eligible entity that has not opted out of the Debt 
Guarantee Program and that issues debt after November 12, 2008, is 
subject to similar notification and certification requirements.) 
Beginning on November 13, 2008, if an eligible entity has not opted 
out, the Interim Rule provides for eligible entities to be charged 
assessments for their participation in the Debt Guarantee Program.\14\
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    \13\ 12 CFR 370.6(b)(1) and (2).
    \14\ 12 CFR 370.6(c).
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    With respect to the Transaction Account Guarantee Program, the 
Interim Rule provides that, beginning on November 13, 2008 and 
continuing through December 31, 2009, any eligible entity that has not 
opted out of this component of the TLG Program will be subject to an 
assessment for its participation in the Transaction Account Guarantee 
Program.

III. Opt Out and Disclosure Deadlines Extended in the Amended Interim 
Rule

    The comment period for the Interim Rule will expire on November 13, 
2008. Thus, the FDIC will not issue a final rule concerning its TLG 
Program before eligible entities are required to opt out on November 
12, 2008, as prescribed in the Interim Rule. The FDIC anticipates 
issuing a final rule after the expiration of the comment period and 
after its consideration of comments related to the Interim Rule. In 
order to provide eligible entities an opportunity to review the final 
rule before they are required to decide whether or not to opt out, this 
Amended Interim Rule extends the opt out deadline for the TLG Program 
until December 5, 2008. For similar reasons, this Amended Interim Rule 
extends the deadline for compliance with certain disclosure 
requirements described in section 370.5(h) until December 19, 2008.
    By establishing December 5, 2008 as the new opt out deadline, 
conforming modifications are required to provisions of part 370 that 
refer to or are based upon the previous opt out deadline of November 
12, 2008. The changes that result from the extended opt out period are 
technical in nature, and are not discussed in further detail. Those 
changes that relate to assessments under the Debt Guarantee Program and 
the Transaction Guarantee Program are described further below.
    Assessments under the Debt Guarantee Program are discussed in 
section 370.6. Under section 370.6(a), eligible entities are not 
required to pay any assessment associated with the Debt Guarantee 
Program for the period from October 14, 2008, through November 12, 
2008. The amendments made to the Interim Rule retain this provision. In 
addition, section 370.6(a) of the Amended Interim Rule includes a 
provision to the effect that an eligible entity that opts out of the 
Debt Guarantee Program by the extended deadline of December 5, 2008 
will not pay any assessment under the program.
    Sections 370.6(b)(1) and (2) contain notice and certification 
requirements for eligible entities that issue guaranteed debt under the 
Debt Guarantee Program for the period from October 14, 2008 through 
November 12, 2008 and for the period after November 12, 2008, 
respectively. Although the notification and certification requirements 
have not changed, the references in those sections to the former opt 
out deadline of November 12, 2008, have been changed to reflect the new 
opt out deadline of December 5, 2008.
    Section 370.6(c) governs the initiation of assessments for the Debt 
Guarantee Program. It originally provided that beginning on November 
13, 2008, any eligible entity that has chosen not to opt out of this 
aspect of the TLG Program would be charged assessments as provided 
elsewhere in part 370. The section did not distinguish between 
overnight debt instruments and other types of newly issued senior 
secured debt. Although the manner of calculating assessments has not 
changed, the revisions to section 370.6(c) reflect two changes. The 
first change reflects the newly extended opt out deadline, and the 
second change differentiates between overnight debt instruments and 
other newly issued senior unsecured debt and explains how assessments 
are initiated for overnight debt instruments as compared with other 
newly issued senior unsecured debt.
    Section 370.6(c), as amended, provides that assessments will 
accrue, with respect to each eligible entity that does not opt out of 
the debt guarantee program on or before December 5, 2008 (1) beginning 
on November 13, 2008, on all senior unsecured debt, other than 
overnight debt instruments, issued by it on or after October 14, 2008 
that is still outstanding on November 13, 2008; (2) beginning on 
November 13, 2008, on all senior unsecured debt, other than overnight 
debt instruments, issued by it on or after November 13, 2008 and before 
December 6, 2008; and (3) beginning on December 6, 2008, on all senior 
unsecured debt issued by it on or after December 6, 2008. Calculations 
related to both overnight debt instruments and other newly issued 
unsecured debt will continue to be made in accordance with section 
370.6(d). Section 370.6(d) remains unchanged.
    Assessments under the Transaction Account Guarantee Program are 
discussed in section 370.7. Under section 370.7(a), eligible entities 
are not required to pay an assessment associated with the Transaction 
Account Guarantee Program from the

[[Page 66162]]

period October 14, 2008, through November 12, 2008. The Amended Interim 
Rule adds a new provision to section 370.7(a) to the effect that an 
eligible entity that opts out of the Transaction Account Guarantee 
Program by the extended opt out deadline of December 5, 2008 will not 
pay any assessment under the program.
    Section 370.7(b) governs the initiation of assessments for the 
Transaction Account Guarantee Program. It originally provided that for 
the period beginning on November 13, 2008, and continuing through 
December 31, 2009, any eligible entity that failed to notify the FDIC 
that it had opted out of the Transaction Account Guarantee Program 
would be charged an assessment for its participation in the Transaction 
Account Guarantee Program. Section 370.7(b) of the Amended Interim Rule 
contains references to the newly extended opt out date. The amended 
section now provides that beginning on November 13, 2008, an eligible 
entity that does not opt out of the Transaction Account Guarantee 
Program on or before December 5, 2008 will be required to pay the FDIC 
assessments on all deposit amounts in noninterest-bearing transaction 
accounts. Calculations related to the amount of assessments for the 
Transaction Account Guarantee Program will continue to be made in 
accordance with section 370.7(c). Section 370.7(c) remains unchanged.

IV. Request for Comments

    The FDIC requests comments on all aspects of the Amended Interim 
Rule. The FDIC specifically requests comments on the following 
questions:
    1. Should the FDIC charge different premium rates for Fed Funds 
and/or other short-term borrowings versus longer term borrowings? If 
so, why, what should be the criteria for determining which borrowings 
qualify for which rates, and what should be the rate differential?
    2. Should banks be allowed to issue guaranteed debt in an amount 
equal to the bank's cap plus its holding company's(ies') cap, so long 
as the total guaranteed debt issued by the bank and its holding 
company(ies) does not exceed their combined cap? If so, why, and how 
could this process be managed to assure, among other things, that the 
entities together do not exceed their combined cap?
    3. Section 370.3(b) of the Interim Rule states, ``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.'' Should 
the FDIC establish an alternative guarantee cap, e.g., a percentage of 
total liabilities, or an average of outstanding senior unsecured debt 
over some period of time, for those eligible entities that had no or de 
minimis amounts of senior unsecured debt outstanding on September 30, 
2008? If so, what should that alternative be, and why?

V. 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 invoked these 
good cause exceptions to make the Interim Rule effective on October 23, 
2008, due to 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.
    For the same reasons, and because comments regarding the Interim 
Rule may be submitted through November 13, 2008, and because the delay 
that would result from complying with notice and public procedure in 
connection with the Amended Interim Rule would frustrate the FDIC's 
objective of quickly restoring liquidity to the financial markets, the 
FDIC finds good cause to adopt the Amended Interim Rule without prior 
notice and comment and without the 30-day delayed effective date.

B. Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
(RCDRIA) 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.\15\ The FDIC invoked the RCDRIA's good cause 
exception to make the Interim Rule effective on October 23, 2008 due to 
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.
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    \15\ 12 U.S.C. 4802.
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    For the same reasons, the FDIC finds good cause to make the Amended 
Interim Rule effective immediately. In addition, the Amended Interim 
Rule does not impose any additional reporting, disclosures, or other 
new requirements on insured depository institutions that were not 
already imposed by the Interim Rule.

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has previously 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 Interim Rule and the Amended Interim 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. Like the Interim Rule, 
this Amended Interim Rule does not involve the issuance of a notice of 
proposed rulemaking. As a result, the requirements of the RFA do not 
apply.

E. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the 
information collections contained in the Interim Rule issued by the 
Board on October 23, 2008, were submitted to and approved by the Office 
of Management and Budget (OMB) under emergency clearance procedures and 
assigned OMB Control No. 3064-0166 (expiring on April 30, 2009). The 
Amended Interim

[[Page 66163]]

Rules does not affect the collections of information outlined in the 
Interim Rule nor does it affect the estimated burden set forth in the 
Interim Rule.

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 12 CFR part 370 as follows:

PART 370--TEMPORARY LIQUIDITY GUARANTEE PROGRAM

0
1. The authority citation for part 370 continues to read as follows:

    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.  370.2  [Amended]

0
2. Amend Sec.  370.2 as follows:
0
A. In paragraph (f), remove ``November 12'' and replace it with 
``December 5''.
0
B. In paragraph (g), remove ``November 12'' and replace it with 
``December 5'' and remove ``November 13'' wherever it appears and 
replace it with ``December 6''.


Sec.  370.3  [Amended]

0
3. Amend Sec.  370.3 as follows:
0
In paragraphs (b) and (f), remove ``November 12'' wherever it appears 
and replace it with ``December 5''.


Sec.  370.5  [Amended]

0
4. Amend Sec.  370.5 as follows:
0
A. In paragraphs (a), (c), (f), and (j), remove ``November 12'' 
wherever it appears and replace it with ``December 5''.
0
B. In paragraph (h), remove ``December 1'' and replace it with 
``December 19''.

0
5. Amend Sec.  370.6 by revising paragraphs (a), (b)(1), (b)(2), and 
(c) to read as follows:


Sec.  370.6  Assessments under the Debt Guarantee Program.

    (a) Waiver of assessment for certain initial periods. No eligible 
entity shall pay any assessment associated with the debt guarantee 
program for the period from October 14, 2008 through November 12, 2008. 
An eligible entity that opts out of the program on or before December 
5, 2008 will not pay any assessment under the program.
    (b) * * *
    (1) Any eligible entity that does not opt out of the Debt Guarantee 
Program on or before December 5, 2008, as provided in Sec.  370.5, and 
that issues any guaranteed debt during the period from October 14, 2008 
through December 5, 2008 which is still outstanding on December 5, 
2008, shall notify the FDIC of that issuance via the FDIC's e-business 
Web site FDICconnect on or before December 19, 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 December 5, 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.
* * * * *
    (c) Initiation of assessments. Assessments, calculated in 
accordance with paragraph (d) of this section, will accrue, with 
respect to each eligible entity that does not opt out of the debt 
guarantee program on or before December 5, 2008.
    (1) Beginning on November 13, 2008, on all senior unsecured debt, 
other than overnight debt instruments, issued by it on or after October 
14, 2008 that is still outstanding on November 13, 2008;
    (2) Beginning on November 13, 2008, on all senior unsecured debt, 
other than overnight debt instruments, issued by it on or after 
November 13, 2008 and before December 6, 2008; and
    (3) Beginning on December 6, 2008, on all senior unsecured debt 
issued by it on or after December 6, 2008.

0
6. Amend Sec.  370.7 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  370.7  Assessments under the Transaction Account Guarantee 
Program.

    (a) Waiver of assessment for certain initial periods. 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. An eligible entity that opts out of the program on 
or before December 5, 2008 will not pay any assessment under the 
program
    (b) Initiation of assessments. Beginning on November 13, 2008 each 
eligible entity that does not opt out of the transaction account 
guarantee program on or before December 5, 2008 will be required to pay 
the FDIC assessments on all deposit amounts in noninterest-bearing 
transaction accounts calculated in accordance with paragraph (c) of 
this section.
* * * * *

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8-26569 Filed 11-4-08; 4:15 pm]
BILLING CODE 6714-01-P