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The CPP Express

Recent CPP activity

December 26, 2008

By MortgageDaily.com staff

Three big U.S. financial firms have received federal approval to become bank holding companies -- giving them access to billions of dollars being doled out under the capital purchase program. Nearly $5 billion in CPP funds were invested last week, while more than $150 billion has been utilized since the program was launched.

The U.S. Department of the Treasury announced Tuesday that $1.9 billion in CPP funds was invested in 43 banks that day and another $2.8 billion was invested in 49 banks last week. So far, $162 billion has been invested under the program -- which is part of the $700 billion Troubled Asset Relief Program.

The Treasury acquires fixed-rate cumulative perpetual preferred stock from participating banks that pays 5 percent during the first five years and 9 percent in subsequent years. The Treasury also receives ten-year warrants.

American Express, which announced last month that its application to become a bank holding company under the Bank Holding Company Act of 1956 was approved by the Federal Reserve, said it has received preliminary approval for a $3.4 billion investment by the Treasury.

The Federal Reserve Board reported Tuesday that it approved an application to become a bank holding company by CIT Group Inc. One day later, CIT announced that it entered a definitive agreement with the Treasury to access $2.4 billion in TARP funds.

The fed announced Wednesday that it has also approved GMAC LLC's bank holding company application -- giving the parent of Residential Capital LLC access to potentially billion in TARP funds.

Other firms to recently report participation in the program are listed in the following table.

CPP Journal
Fulton Financial Corp. Dec. 10 preliminary approval $375 million
Citizens Republic Bancorp Dec. 15 sale completed $300 million
First BanCorp Dec. 23 preliminary approval $60 million
Union Bankshares Corp. Dec. 15 preliminary approval $59 million
Lakeland Financial Corp. Dec. 23 preliminary approval $56 million
Cadence Financial Corp Dec. 18 shareholder approval $44 million
Berkshire Hills Bancorp Dec. 23 sale completed $40 million
Horizon Bancorp Dec. 23 sale completed $25 million
Intervest Bancshares Corp. Dec. 12 preliminary approval $25 million
Shore Bancshares, Inc. Dec. 17 preliminary approval $25 million
C&F Financial Corp. Dec. 12 preliminary approval $20 million
Idaho Bancorp Dec. 22 preliminary approval $7 million

The Capital Journal
MortgageDaily.com has tracked almost 50 of the nearly 90 institutions that have accessed or been approved to access the $700 billion Troubled Asset Relief Program. Two non-banks recently announced their intentions to become bank holding companies -- though a failed attempt by another firm to become a bank holding company could spell disaster for one of the country's biggest mortgage lenders.

CPP Journal
A new watchdog has been confirmed to oversee the $700 billion Troubled Asset Relief Program -- which has seen plenty of action recently.

Firms Restructure to Tap TARP Funds
The U.S. Department of the Treasury has already disbursed $150 billion in funds from the Troubled Asset Relief Program to financial institutions and still has another $100 billion to go. The lure of cheap capital has prompted another five firms -- including a commercial financial company, a mortgage servicer and a mortgage insurer -- to initiate the process of converting to bank-holding companies. Three firms are making bank acquisitions as part of the conversion process.

Banks Jump On CPP Bandwagon
A stream of banks have recently reported being approved to sell nearly $1.5 billion in securities to the U.S. Department of the Treasury under the Troubled Asset Relief Program. Most of the participants indicated that they were already well capitalized.

Banks Continue to Tap CPP
Utilization of the Treasury's capital purchase program continues to be brisk -- with most institutions promising to use the funds to strengthen community activity. The program taps into available funds from the $750 billion Troubled Asset Relief Program.

Banks Grab TARP Capital
More than 1,000 financial institutions have applied for or received capital investments from the Troubled Asset Relief Program, according to Congressional testimony. Funds from the program will be used to support lending and acquire other banks.

Troubled Mortgage Asset Purchases Curtailed
The U.S. Treasury secretary said today that the Troubled Asset Relief Program will not be used to purchase troubled mortgage assets. He said the $700 billion fund would be better utilized for capital investment.

TARP purchases of distressed assets put on hold

Some Firms Saved by Mergers
Mergers have picked up steam as several mortgage companies teeter on the brink of insolvency. Some of the mergers are forcing changes at the top of the executive ranks. Meanwhile, losses continue to pound financial firms -- forcing regulator actions at some.

Volatile Banking Sector Reshapes
As capital continued to be wiped out and dozens of small banks were hit with regulatory orders, some financial institutions have been approved to participate in the government's capital purchase plan. One mortgage company is shedding its real estate investment trust status, another is shutting down its commercial operations and a third will be acquired by a bank.

Government to Invest in Banks
Some of the $700 billion Troubled Asset Relief Program will be used for the U.S. government to invest directly in U.S. banks. The rescue package also includes bank loan guarantees and provisions to stabilize the commercial paper market.

$250 billion of TARP funds targeted

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