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October 14, 2008
HP-1212
Treasury Requests Public Input on Establishment of
Guaranty Program for Troubled Assets
Washington – The Department of the Treasury released a request for public input today on an insurance program for troubled assets which is required by the Emergency Economic Stabilization Act of 2008 (EESA). The purpose of this program is to restore liquidity and stability to the financial system, while minimizing any potential long term negative impact on taxpayers.
Under the EESA the Secretary is charged with establishing a program that will guarantee principal of, and interest on, troubled assets originated or issued prior to March 14, 2008. The program may take any form and may vary by asset class, but it must be voluntary and self-funding. The Secretary has the authority to set premiums to reflect the credit risk characteristics of the insured assets so as to ensure that taxpayers are fully protected.
Treasury invites comment on how the program should be structured to minimize adverse selection, including how premiums should be calculated, what events should trigger insurance payout, what form that payout should take, and which institutions and assets should be eligible. The Department also asks for public comment on technical considerations, including what legal, accounting, or regulatory issues would arise and what administrative challenges the program will create.
Comments are due by Tuesday, October 28 and may be submitted at www.regulations.gov.
REPORTS