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Washington
Inside Washington (07/28/2009)
* WASHINGTON (7/29/09)--The Federal Deposit Insurance Corp. (FDIC) has demonstrated that it is using some alternatives to resolve bank failures. Last week, the FDIC let a Georgia bank use the $300 million it raised from non-private investors to acquire six subsidies of Security Bank Corp. in Macon, Ga. All six subsidies had failed Friday. Over the weekend, a management team took control of 86% of Security’s assets and began operating all of the branches of the banks. The FDIC deserves credit for being innovative in a tough environment, according to Robert Hartheimer, a former FDIC director of resolutions (American Banker July 28). Private equity remains important for acquiring failed institutions, but FDIC officials appear hesitant to allow wealthy investors with little banking experience take over institutions. The FDIC has proposed restrictions on private-equity buyers, but the restrictions were criticized for being too tough. However, in the case of Security, financial observers anticipate that the bank may not be required to face the restrictions ... * WASHINGTON (7/29/09)--As the Treasury Department secures details for a plan to use Troubled Asset Relief Program (TARP) funds to buy Small Business Administration (SBA) loans, SBA lenders are trying to determine the best way to spend the $15 billion in funds (American Banker July 28). The money could be used to extend fee reductions, increase the guarantee limit, or guarantee increases in SBA’s 7(a) and 504 lending program, some lenders said. Another industry representative has proposed using the funds in a new program that could aid small businesses. The program would act as a “credit restart” and offer new loans to businesses behind on their payments. The loans could help the businesses become profitable again. The loans would carry a higher interest rate, and the Treasury could divide interest payments with the lender ... * WASHINGTON (7/29/09)--The Securities and Exchange Commission (SEC) Monday announced several actions to prevent abusive short sales. First, the SEC finalized an interim temporary rule that would reduce the potential for abusive, “naked” short-selling in the securities market by requiring broker-dealers to purchase or borrow securities to deliver on a short sale. Second, the SEC is working to make short sale volume and transaction data available through self-regulatory organizations’ website. Third, the SEC is planning a roundtable Sept. 30 to discuss securities lending, pre-borrowing and additional short-sale disclosures. The roundtable will consider the impact of a program requiring short-sellers to pre-borrower their securities, and adding a short sale indicator to the tapes to which transactions are reported for exchange-list securities. Naked short sales occur when an investor sells shares “short” without first having borrowed them. The sales are permitted because there is no legal requirements that a short seller borrow the shares before effecting a short sale, but such sales can be used to manipulate the market, SEC said ...


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