51806 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 

§ 592.510 Base time rate. 

(a) For each fiscal year and based on 

the previous fiscal year’s actual costs 

and hours, FSIS calculates the base time 

rate for inspection services, per hour per 

program employee, using the following 

formula: Office of Field Operations plus 

Office of International Affairs inspection 

program personnel salaries paid divided 

by regular hours multiplied by the next 

year’s percentage of cost of living 

increase, plus the benefits rate, plus the 

travel and operating rate, plus the 

overhead rate, plus an allowance for bad 

debt. 

(b) FSIS calculates the components of 

the base time rate (which are based on 

previous fiscal year’s actual costs) using 

the following formulas: 

(1) Benefits Rate: Direct benefits costs 

multiplied by the next calendar year’s 

percentage cost of living increase. Some 

examples of direct benefits are health 

insurance, retirement, life insurance, 

and Thrift Saving Plan (TSP) retirement 

basic and matching contributions. 

(2) Travel and Operating Rate: Total 

direct travel and operating costs 

multiplied by the percentage of 

inflation. 

(3) Overhead Rate: All indirect costs 

plus the average information technology 

(IT) costs over the previous two years in 

the Public Health Data Communication 

Infrastructure System Fund plus the 

Office of Management Program cost in 

the Reimbursable and Voluntary Funds 

less any Greenbook costs (i.e., costs of 

USDA support services prorated to the 

service component for which fees are 

charged) that are not related to food 

inspection, divided by total direct hours 

(regular, overtime, and holiday) worked 

across all funds, multiplied by the 

percentage of inflation. 

(4) Allowance for Bad Debt Rate: Total 

allowance for bad debt (for plants and 

establishments that declare bankruptcy) 

divided by total direct hours (regular, 

overtime, and holiday) worked. 

(c) The cost of living increases and 

percentage of inflation factors used in 

the formulas in this section are based on 

the Office of Management and Budget’s 

Presidential Economic Assumptions. 

12. In § 592.520, revise the second 

sentence to read as follows: 

§ 592.520 Overtime rate. 

* * * The official plant must give 

reasonable advance notice to the 

inspector of any overtime service 

necessary. For each fiscal year and 

based on the previous fiscal year’s 

actual costs and hours, FSIS calculates 

the overtime rate for inspection service, 

per hour per program employee, using 

the following formula: Office of Field 

Operations plus Office of International 

Affairs inspection program personnel 

salaries paid divided by regular hours 

multiplied by the next year’s percentage 

of cost of living increase multiplied by 

1.5 plus the benefits rate, plus the travel 

and operating rate, plus the overhead 

rate, plus an allowance for bad debt. 

FSIS calculates the benefits rate, travel 

and operating rate, overhead rate, and 

allowance for bad debt using the 

formulas in § 592.510(b), and the cost of 

living increases and percentage of 

inflation factors in § 592.510(b). 

13. In 592.530, revise the second 

sentence to read as follows: 

§ 592.530 Holiday rate. 

* * * The official plant must, in 

advance of such holiday work, request 

that the inspector in charge furnish 

inspection service during such period 

and must pay the Agency for such 

holiday work at the hourly rate. For 

each fiscal year and based on the 

previous fiscal year’s actual costs and 

hours, FSIS calculates the holiday rate 

for inspection service, per hour per 

program employee, using the following 

formula: Office of Field Operations plus 

Office of International Affairs inspection 

program personnel salaries paid divided 

by regular hours multiplied by the next 

year’s percentage of cost of living 

increase multiplied by 2, plus benefits 

rate, plus the travel and operating rate, 

plus the overhead rate, plus an 

allowance for bad debt. FSIS calculates 

the benefits rate, travel and operating 

rate, overhead rate, and allowance for 

bad debt using the formulas in 

§ 592.510(b), and the cost of living 

increases and percentage of inflation 

factors in § 592.510(b). 

Done in Washington, DC, on October 5, 

2009. 

Alfred V. Almanza, 

Administrator. 

[FR Doc. E9–24283 Filed 10–7–09; 8:45 am] 

BILLING CODE 3410–DM–P 

FEDERAL RESERVE SYSTEM 

[Regulation A; Docket No. R–1371] 

12 CFR Part 201 

Extensions of Credit by Federal 

Reserve Banks 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Proposed rule. 

SUMMARY: The Board of Governors 

(Board) is publishing for public 

comment a proposed amendment to 

Regulation A that would provide a 

process by which the Federal Reserve 

Bank of New York may determine the 

eligibility of credit rating agencies and 

the ratings they issue for use in the 

Term Asset-Backed Securities Loan 

Facility, which is maintained by the 

Federal Reserve Bank of New York and 

for which the Board has expressly set a 

particular credit rating requirement for 

collateral offered by the borrower. The 

proposed rule would not apply to 

discount window lending or other 

extensions of credit provided by the 

Federal Reserve System. In addition, the 

rule would only apply to asset-backed 

securities that are not backed by 

commercial real estate. This proposed 

amendment is designed to provide the 

Federal Reserve Bank of New York with 

a consistent framework for determining 

the eligibility of ratings issued by 

individual credit rating agencies when 

used in conjunction with a separate 

asset-level risk assessment process. The 

proposed amendment does not 

represent a change in the stance of 

monetary policy. The Board solicits 

comment on all aspects of the proposal, 

as well as specific aspects of the 

proposal as set out in the preamble. 

DATES: Written comments on this notice 

of proposed rulemaking must be 

submitted on or before November 9, 

2009. 

ADDRESSES: You may submit comments, 

identified by Docket Number R–1371, 

by any of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include docket number in the subject 

line of the message. 

• Fax: (202) 452–3819 or (202) 452– 

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm, as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper in Room MP–500 of the Board’s 

Martin Building (20th and C Streets, 

NW.) between 9 a.m. and 5 p.m. on 

weekdays. 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 51807 

1See International Organization of Securities 

Commissions, Report on the Activities of Credit 

Rating Agencies, (Sept. 2003). 

2See Securities and Exchange Commission, 

Proposed Rule: Oversight of Credit Rating Agencies 

as Nationally Recognized Statistical Rating 

Organizations, 72 FR 6378–01 (Feb. 9, 2007) (herein 

‘‘CRA Proposed Rule’’). 

3U.S. Securities and Exchange Commission, 

Office of Inspector General, The SEC’s Role 

Regarding and Oversight of Nationally Recognized 

Statistical Rating Organizations (NRSROs), (Sept. 

2009) p. 44. 

4U.S. Securities and Exchange Commission, 

Report on the Role and Function of Credit Rating 

Agencies in the Operation of the Securities Markets, 

(Jan. 2003) p. 6. 

5See, e.g., 12 U.S.C. 24a(a)(3)(A)(i) (financial 

subsidiaries of national banks); 12 U.S.C. 

1831e(d)(4)(A) (activities of savings associations); 

15 U.S.C. 78c(a)(41) (definition of ‘‘mortgage related 

security’’); 15 U.S.C. 80a–6(a)(5)(A)(iv)(I) 

(exemption from Investment Company Act 

provisions); and 29 U.S.C. 1341(b)(5)(B)(i)(I) (ERISA 

termination of single employer plans); Cal. Gov. 

Code § 53601 (West 2009); N.Y. Gen. Municipal 

Law § 10 (McKinney 2009). 

6CRARA (Pub. L. No. 109–291, 120 Stat. 1327) is 

primarily codified at 15 U.S.C. 78o–7. 

7The CRARA replaced the existing SEC staff 

approval system with ‘‘a transparent and voluntary 

registration system that favors no particular 

business model, thus encouraging purely statistical 

models to compete with the qualitative models of 

the dominant rating agencies and investor-based 

models to compete with fee-based models.’’ S. Rep. 

No. 109–326 at p. 7. 

8See 17 CFR 240.17g–1 through 240.17g–6. 

9 In addition to the use of ratings in helping to 

manage the credit risk of the Federal Reserve’s 

balance sheet, credit ratings also play a role in the 

Federal Reserve’s banking supervision and 

regulation function. 

10Regulation A states that a Reserve Bank’s 

advance to a depository institution must be secured 

to the satisfaction of the Reserve Bank. 12 CFR 

201.3(a)(2). 

11For the terms and conditions and frequently 

asked question of the TALF, refer to http:// 

www.federalreserve.gov/monetarypolicy/talf.htm. 

12Small business loans whose principal and 

interest payments are fully guaranteed by the full 

faith and credit of the United States are also 

accepted at the TALF, however, no credit rating is 

required for ABS backed by such loans. 

FOR FURTHER INFORMATION CONTACT: 

William R. Nelson, Associate Director 

(202/452–3579), Division of Monetary 

Affairs; Christopher W. Clubb, Senior 

Counsel (202/452–3904), Legal Division; 

for users of Telecommunication Devices 

for the Deaf (TDD) only, contact 202/ 

263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Credit rating agencies. Credit rating 

agencies assess the credit risk of 

corporate or government borrowers and 

issuers of bonds, debt securities, and 

other financial obligations.1 A credit 

rating is a credit rating agency’s opinion 

of how likely an issuer is to make timely 

payments on a financial obligation, 

based on a variety of information 

regarding the issuer, the market in 

which the issuer operates, the overall 

economy, and the nature of the security. 

Because issuers may issue different 

types of fixed-income securities, 

different securities by the same issuer 

may have different credit ratings 

according to their different risk profiles. 

Credit rating agencies issue credit 

ratings for debt securities of public 

companies, sovereign governments, and 

municipalities, and for structured 

products such as asset-backed 

securities.2

Some credit rating agencies 

emphasize quantitative models based on 

statistical analysis of an issuer’s 

financial disclosures to derive their 

ratings, while other credit rating 

agencies review both quantitative and 

qualitative indicators (including 

information that may be provided by the 

issuer and other sources) to form an 

assessment that is recommended to a 

rating committee, which then assigns 

the rating. While the exact processes 

used by a credit rating agency to derive 

a credit rating may be proprietary in 

some cases, credit rating agencies 

generally provide public statements 

outlining their rating philosophy or 

general methodology for a particular 

asset class. After the credit rating is 

issued, the credit rating agency will 

generally continue to monitor the issuer 

and/or its securities on an ongoing 

basis, although the U.S. Securities and 

Exchange Commission (SEC) has found 

that such monitoring tends to be less 

comprehensive than the initial review.3

NRSRO credit ratings. The term 

‘‘nationally recognized statistical rating 

organization’’ was originally adopted by 

the SEC in 1975 for use in determining 

capital charges for broker-dealers on 

different grades of debt securities.4 The 

concept of ratings by ‘‘nationally 

recognized statistical rating 

organizations’’ has been incorporated 

into a range of state and federal 

legislation and regulations.5

The Credit Rating Agency Reform Act 

of 2006 (CRARA) sets out a statutory 

definition of ‘‘nationally recognized 

statistical rating organization’’ (NRSRO) 

and provides the SEC with the authority 

to implement registration and oversight 

rules with respect to registered credit 

rating agencies.6 The CRARA’s 

provisions, and the grants of SEC 

rulemaking authority under these 

provisions, establish a voluntary 

registration process and regulatory 

program for credit rating agencies opting 

to have their credit ratings qualify for 

purposes of laws and rules using the 

term ‘‘nationally recognized statistical 

rating organization.’’ 7 Such credit rating 

agencies are required to register with the 

SEC; make public certain information to 

help persons assess their credibility; 

make and retain certain records; furnish 

the SEC with certain financial reports; 

implement policies and manage the 

handling of material non-public 

information and conflicts of interest; 

and abide by certain prohibitions 

against unfair, coercive, or abusive 

practices. The CRARA also prohibits the 

SEC from evaluating the quality of 

rating methodologies in making a 

determination about whether a credit 

rating agency is an NRSRO. The SEC has 

promulgated regulations to implement 

the CRARA statutory provisions.8

Like other participants in the 

financial markets, the Federal Reserve 

System is an active user of NRSRO 

credit ratings. Credit ratings are used to 

support the efforts of several System 

programs, including discount window 

lending and recent specialized System 

liquidity and securities lending 

programs in response to the financial 

crisis.9 Reserve Banks make credit 

available to depository institutions 

through the discount window to meet 

various liquidity needs. Under the 

Board’s Regulation A, the Reserve Banks 

have the discretion to determine when 

a discount window advance to a 

depository institution is adequately 

secured.10

TALF. The Term Asset-backed 

Securities Lending Facility (TALF) is a 

funding facility to help market 

participants meet the credit needs of 

households and businesses by 

supporting the issuance of new assetbacked securities (ABS) collateralized 

by loans of various types to consumers 

and businesses of all sizes.11 The 

underlying credit exposures of TALFeligible ABS must be auto loans, student 

loans, credit card receivables, 

equipment loans, floorplan loans, 

insurance premium finance loans, 

receivables related to residential 

mortgage servicing advances (servicing 

advance receivables), or commercial 

mortgages.12 The TALF was established 

under section 13(3) of the Federal 

Reserve Act, which permits the Board of 

Governors of the Federal Reserve Board, 

in unusual and exigent circumstances, 

to authorize Reserve Banks to extend 

credit to individuals, partnerships and 

corporations that are unable to obtain 

adequate credit accommodations. The 

Board has determined the terms and 

conditions for TALF borrowing and 

eligible collateral, including minimum 

credit ratings and the set of credit rating 

agencies whose ratings may be accepted 


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13Only ABS issued on or after January 1, 2009 

may qualify for TALF funding except for ABS 

guaranteed by the Small Business Administration, 

which can be issued on or after January 1, 2008. All 

outstanding CMBS meeting the other TALF 

requirements may qualify for TALF funding. 14 12 CFR 201.3(a)(2). 

15SEC Form NRSRO (SEC 1541) (4–09) Exhibits 

6 and 7. See also 17 CFR 240.17g–5(a) and (b); 15 

U.S.C. 78o–7(h). 

16 17 CFR 240.17g–5(c)(2). 

17 15 U.S.C. 78o–7(c)(2). 

for purposes of TALF by the Federal 

Reserve Bank of New York. 

In authorizing the TALF, the Board 

directed that TALF-eligible collateral 

must be ABS denominated in U.S. 

dollars that has a credit rating in the 

highest long-term or short-term 

investment-grade rating category from 

two or more eligible NRSROs and does 

not have a credit rating below the 

highest investment-grade category from 

an eligible NRSRO. When TALF was 

established, the Board and the Federal 

Reserve Bank of New York accepted 

credit ratings from three NRSROs 

(Standard & Poor’s, Moody’s Investors 

Service, and Fitch Ratings). The Federal 

Reserve put a high priority on making 

the TALF available expeditiously while 

ensuring appropriate protection against 

credit risk for the U.S. taxpayer. In its 

efforts to provide liquidity to TALF ABS 

sectors as expeditiously as possible, the 

Board recognized that market 

participants have continued to rely 

upon the ratings of these NRSROs, 

generally to the exclusion of those with 

less experience rating ABS. 

Since the establishment of TALF, the 

Federal Reserve has been conducting a 

broader review of its approach to using 

rating agencies encompassing the 

ratings of securities of all types accepted 

as collateral at all of the Federal 

Reserve’s recently established credit 

facilities as well as collateral accepted 

to secure regular discount window 

loans. In May 2009, the Board 

announced an extension of eligible 

TALF collateral to include certain highquality newly issued and legacy 

commercial mortgage-backed securities 

(CMBS).13 Due to concerns about the 

historical accuracy of CMBS ratings, the 

role of ratings in the evaluation of 

legacy CMBS (which depend on the 

NRSROs continued monitoring 

activities), and the presence of two 

additional NRSROs with substantial 

experience rating CMBS, the Board and 

the Federal Reserve Bank of New York 

conducted a review of the five NRSROs 

who expressed interest in having their 

ratings accepted for CMBS pledged to 

the TALF. The review concluded that 

the ratings of these five NRSROs were 

of sufficient quality to provide useful 

information in the Federal Reserve Bank 

of New York’s verification of the credit 

quality on the most senior classes of 

newly issued and legacy CMBS when 

used in conjunction with a separate 

asset-level risk assessment process. As a 

result, the Board amended the terms of 

the TALF to provide that TALF-eligible 

CMBS must have a triple-A long-term 

rating from at least two of those five 

NRSROs, and not have a lower rating 

from any of the other five NRSROs. Due 

to the factors listed above, particularly 

the importance of verifying the 

monitoring capabilities of the NRSROs 

that rate CMBS, the rule proposed in 

this notice will not apply to the NRSRO 

ratings that are accepted for CMBS 

pledged to the TALF. 

II. Proposed Rule 

The proposed rule presented in this 

notice is another step in the Federal 

Reserve’s process of reviewing the 

appropriate use of NRSROs in its credit 

facilities. By this notice, the Board is 

proposing an amendment to the Board’s 

Regulation A to govern the Federal 

Reserve Bank of New York’s acceptance 

of credit ratings in connection with 

TALF ABS other than CMBS. As noted 

above, the proposed rule would apply 

only to the acceptance of credit ratings 

with respect to ABS pledged to the 

TALF and does not apply to general 

discount window lending under the 

primary, secondary, or seasonal credit 

facilities established in Regulation A, or 

any other credit facilities. Extensions of 

credit through the discount window are 

structured differently from those 

extended under TALF and the approach 

presented in the proposed rule would 

likely not be feasible in the discount 

window scenario. In such cases, the 

Reserve Banks would continue to ensure 

that they are adequately secured as 

otherwise provided in Regulation A.14

The Federal Reserve will continue to 

review the use of credit ratings with 

respect to its other credit facilities. 

The proposed rule adopts an objective 

minimal experience-based approach 

specific to the types of assets accepted 

as collateral in TALF. The proposed rule 

is intended to strike a balance between 

the goal of promoting competition 

among NRSROs and the goal of ensuring 

appropriate protection against credit 

risk for the U.S. taxpayer. As explained 

below, an additional risk assessment by 

the Federal Reserve Bank of New York 

with respect to TALF collateral is an 

important complement to the proposed 

rule’s broadening of the set of eligible 

NRSROs. 

As a threshold requirement, the 

proposed rule states that the Federal 

Reserve Bank of New York may only 

accept a credit rating issued by a credit 

rating agency that is registered with the 

SEC as an NRSRO for issuers of assetbacked securities pursuant to the 

CRARA. The proposed rule would 

leverage off of the NRSRO framework 

established by CRARA and the SEC 

regulations. A registered NRSRO must 

comply with SEC rules regarding the 

prevention of misuse of material 

nonpublic information; conflicts of 

interest; and prohibitions against unfair, 

coercive, or abusive practices. In 

particular, an NRSRO is expressly 

prohibited from having certain types of 

conflicts of interest relating to the 

issuance of credit ratings (such as the 

NRSRO being paid by issuers to 

determine credit ratings with respect to 

securities they issue) unless the 

conflicts are publicly disclosed in the 

NRSRO’s registration materials and the 

NRSRO establishes and enforces written 

policies and procedures to address and 

manage the conflict of interest.15 In 

addition, SEC rules prohibit NRSROs 

from having certain enumerated 

conflicts of interest under any 

circumstances (such as the NRSRO 

directly owning securities of the 

organization that is subject to the credit 

rating).16 The Board believes that these 

disclosure provisions and conflict of 

interest prohibitions are prudent and 

relevant to the evaluation of credit 

rating agencies with respect to TALF. 

Registration with the SEC as an 

NRSRO is not, however, a guarantee of 

the quality of the credit ratings issued. 

The CRARA expressly prohibits the SEC 

and any state from regulating the 

substance of credit ratings or the 

procedures and methodologies by which 

any NRSRO determines credit ratings.17

Therefore, the Board believes additional 

criteria should be established to ensure 

that the Federal Reserve Bank of New 

York only accepts credit ratings that are 

reasonably likely to assist in the Federal 

Reserve Bank of New York’s risk 

assessment to determine eligibility of 

ABS pledged as collateral to the TALF. 

The Board specifically solicits public 

comment regarding whether NRSRO 

registration is an appropriate threshold 

requirement for being accepted at TALF 

and whether NRSRO registration should 

be the sole requirement for eligibility for 

use in TALF. In responding, a 

commenter should explain how credit 

risk can be controlled with NRSRO 

registration as the sole criterion. 

The Board is proposing a rule for 

reviewing the acceptability of a 

particular NRSRO generally by reference 

to certain experience-based criteria. The 

experience requirement is consistent 


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18The proposed rule would permit an NRSRO to 

aggregate ratings on residential mortgage-backed 

securities (not currently included in the TALF) for 

purposes of meeting the ten-transaction 

requirement for Category 3 (mortgage servicing 

advance loans TALF sector). 

19Such legal and institutional considerations 

include: legal standards for recognition of ‘‘true 

sale’’ of assets into a special purpose vehicle; legal 

standards for determining substantive consolidation 

and their impact on the rights of creditors and the 

management of ‘‘clawback risk’’; treatment of issuer 

bankruptcies across different regulators; and tax 

considerations. 

with the intent of CRARA, which 

requires a measure of market acceptance 

for NRSRO designation as well as the 

SEC rules regarding the NRSRO 

designation that require market 

acceptance within a defined asset 

category. Rather than requiring 

attestations from a particular number of 

Qualified Institutional Buyers (QIBs) 

that they rely upon an NRSRO’s ratings, 

the rule would require that the NRSRO 

had issued ratings on at least ten 

transactions within a specified asset 

category. The asset categories are: 

• Category 1—auto loans, floorplan 

loans, and equipment loans TALF 

sectors; 

• Category 2—credit card receivables 

and insurance premium finance loans 

TALF sectors; 

• Category 3—mortgage servicing 

advance receivables TALF sector; 18 and 

• Category 4—student loans TALF 

sector. 

The Board believes that experience in 

any of the TALF sectors grouped 

together in an asset category provides 

similar experience for each of the TALF 

sectors within that asset category. For 

example, Category 1 includes the auto 

loans, floorplan loans, and equipment 

loans TALF sectors. The Board believes 

that the ABS sectors within each 

category are similar in terms of the types 

of collateral, the manner in which the 

collateral is typically evaluated, and 

typical transactional structures and legal 

features. Experience across asset 

categories would not, however, be 

permitted to be aggregated under the 

proposed rule because the Board 

believes that the competencies required 

for ratings of ABS across different 

categories are not sufficiently similar. 

The four asset categories defined in 

the rule are significantly narrower than 

the ‘‘ABS’’ category in which a credit 

rating agency may be approved as an 

NRSRO by the SEC. Relying upon the 

issuance of a minimal number of ratings 

as opposed to attestations from QIBs in 

each of the four asset categories should 

ensure a minimal level of expertise in 

rating the types of assets for which the 

ratings will be accepted. Furthermore, 

the Board believes that credit rating 

agencies’ expertise when rating 

collateral of any given type can increase 

considerably upon reviewing a modest 

number of transactions. The experience 

requirement, therefore, would ensure 

that TALF-eligible NRSROs have 

accumulated sufficient knowledge of the 

specific asset category. The Board 

specifically solicits comments on 

whether an experience-based approach 

is appropriate for determining the 

suitability of NRSROs for the TALF 

program. 

In addition, the proposed rule would 

allow the Federal Reserve Bank of New 

York to accept credit ratings only from 

a credit rating agency that has a current 

and publicly available rating 

methodology specific to ABS in the 

particular TALF asset sector (as defined 

in the TALF haircut schedule) for which 

the credit rating agency wishes its 

ratings to be considered for TALF. The 

Board believes that this is a prudent 

requirement because it ensures that the 

NRSRO has carefully thought about its 

approach to the TALF sector and that 

market participants are aware of the 

methodology and have had an 

opportunity to provide feedback to the 

NRSRO. The Board requests comment 

on whether a published methodology 

specific to asset-backed securities in the 

relevant TALF sector is an appropriate 

requirement for credit rating agencies in 

the TALF program. 

In specifying that only transactions 

denominated in U.S. dollars would 

qualify under the experience 

requirement, the Board recognizes that 

rating opinions rely heavily upon expert 

judgment regarding conditions in the 

market within which the collateral is 

originated, the legal environment in 

which lenders and borrowers operate 

(both at origination and in the event of 

default), and complex transactional 

features that have resulted as a response 

to legal and institutional considerations 

specific to the United States.19

The Board considered both the 

number of transactions and period 

within which they must have occurred 

in determining an appropriate 

experience threshold for the rule. The 

Board believes that, while the learning 

curve for rating ABS is relatively steep, 

developing expertise in assessing the 

credit risk of an ABS transaction 

requires exposure to a diversity of 

transactional features within a given 

asset category. The types of collateral 

backing the securities within each of the 

TALF ABS sectors is relatively more 

homogenous than other types of ABS 

(such as CMBS), and therefore a 

threshold of ten transactions within 

approximately a three-year period (a 

little more than three transactions per 

year) appeared to be appropriate. 

Recognizing that ABS has evolved and 

rating agencies have turnover that can 

degrade institutional memory, a threeyear window appeared to be an 

appropriate amount of time within 

which past expertise would be generally 

applicable in the present. 

The Board requests comment 

generally on whether the experience 

approach set out in the proposed rule is 

appropriate. In addition, the Board 

invites comment on whether ten 

transactions within the approximately 

three-year window is appropriate to 

achieve the goals of the proposed rule. 

The Board also requests comment on 

whether the TALF asset sectors grouped 

together in the asset categories set out in 

the proposed rule are sufficiently 

similar that experience gained by 

issuing ratings with respect to one of the 

TALF sectors in a asset category can act 

as a substitute for experience gained by 

issuing ratings with respect to the other 

TALF sectors in the category. The Board 

also solicits comment on whether 

experience issuing credit ratings with 

respect to residential mortgage-backed 

securities should be treated as a 

substitute for experience in issuing 

credit ratings in the mortgage servicing 

advances TALF sector. Finally, the 

Board requests comment on whether the 

experience requirement is appropriately 

limited to transactions denominated in 

U.S. dollars for the reasons set out 

above. 

The proposed rule also describes the 

process whereby the Federal Reserve 

Bank of New York would determine 

whether an NRSRO becomes eligible to 

have its ratings accepted for TALF ABS. 

Under the proposal, a credit rating 

agency that wishes to have its ratings 

accepted for TALF ABS transactions 

would send a written notice to the 

Credit, Investment, and Payment Risk 

group of the Federal Reserve Bank of 

New York and include the information 

addressing the factors listed above (i.e., 

registered NRSRO for ABS, published 

methodology, and experience issuing 

ratings in the TALF category) with 

respect to each TALF asset sector for 

which it wishes its ratings to be 

accepted. The Federal Reserve Bank of 

New York will review the submission 

and notify the NRSRO within five 

business days as to whether any 

additional information is necessary. 

After review of all information 

necessary to determine the eligibility of 

an NRSRO pursuant to the factors in the 

proposed rule, the Federal Reserve Bank 

of New York will notify the NRSRO 

regarding its eligibility to have its 

ratings accepted at the TALF. The Board 


srobinson on DSKHWCL6B1PROD with PROPOSALS
51810 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 

20The additional risk assessment is being adopted 

to clarify and make systematic the process whereby 

the Federal Reserve Bank of New York determines 

whether a bond is acceptable as TALF collateral 

based on the TALF terms and conditions. The 

Federal Reserve Bank of New York already uses an 

additional risk assessment process to determine 

whether CMBS is eligible for TALF. Satisfaction of 

the Federal Reserve Bank of New York’s risk 

assessment process for ABS is being added to the 

TALF program terms and conditions. 

21 13 CFR 121.201. 

22 5 U.S.C. 603. 

requests comment on whether this 

process will be efficient for purposes of 

NRSROs wishing to have their ratings 

accepted at TALF and, in particular, 

whether the proposed time frames are 

appropriate. 

Under the proposed rule, the Federal 

Reserve Bank of New York could, at any 

time, review the continued use of 

ratings from a credit rating agency in 

one or more TALF ABS sectors and 

determine that such credit ratings were 

no longer acceptable if the credit rating 

agency no longer met the eligibility 

requirements or conditions. The NRSRO 

would be notified by the Federal 

Reserve Bank of New York of its 

concerns. 

Finally, the proposed rule sets out 

two conditions that the Federal Reserve 

Bank of New York must ensure are met 

by an NRSRO in order for an NRSRO to 

have its credit ratings accepted for 

TALF ABS. First, the NRSRO must agree 

to discuss with the Federal Reserve its 

views of the credit risk of any 

transaction within the TALF asset sector 

that has been submitted to TALF and 

upon which the NRSRO is being or has 

been consulted by the issuer. The Board 

recognizes that qualitative analysis and 

expert judgment constitutes much of the 

value provided to investors by credit 

rating agencies and therefore can assist 

the Federal Reserve Bank of New York 

in the risk assessment process. In 

addition, issuers typically consult with 

several NRSROs about a transaction, but 

request formal ratings from only a 

subset. The condition will enable the 

Federal Reserve to learn the views of 

NRSROs consulted but ultimately not 

hired by the issuer to provide a rating. 

Second, the NRSRO must agree to 

provide any information requested by 

the Federal Reserve regarding the credit 

rating agency’s continued eligibility for 

its ratings to be accepted at TALF under 

the factors set out in the proposed rules. 

Submission of this information is 

necessary to ensure that NRSROs that 

are accepted for TALF continue to meet 

the eligibility requirements for TALF 

under the proposed rule. The Board 

solicits comment on whether these 

conditions are appropriate for NRSROs 

submitting credit ratings for purposes of 

TALF. 

Additional risk assessment. 

Expanding the set of NRSROs accepted 

at TALF could increase credit risk in the 

program by increasing the risk of less 

rigorous credit rating standards or by 

increasing the risk of ‘‘rating-shopping.’’ 

To address this and to protect against 

TALF accepting excessive risk, the 

Federal Reserve Bank of New York will 

implement an additional risk 

assessment process for TALF ABS 

transactions.20 The business reasons for 

the additional risk assessment process 

are independent of an expansion of the 

set of NRSROs accepted for purpose of 

TALF, but the Board believes that such 

a risk assessment could serve to mitigate 

any increase in credit risk to the U.S. 

taxpayer that could potentially result 

from an expansion of the set of NRSROs 

accepted at TALF. 

In order for the Federal Reserve Bank 

of New York to be able to conduct the 

additional risk assessment in a timely 

manner, the TALF ABS terms and 

conditions include a provision that each 

issuer wishing to bring a TALF-eligible 

ABS transaction to market is required to 

provide to the Reserve Bank, at least 

three weeks prior to the subscription 

date of the transaction, a specific set of 

information, including, but not limited 

to, all data the issuer has provided to 

any NRSRO regarding the transaction. 

The Federal Reserve Bank of New York 

(along with the TALF collateral 

monitor) will use that information to 

assist in its risk assessment process. 

Issuers would also be required to submit 

an executed waiver or consent for each 

prospective TALF transaction that 

would authorize any NRSRO from 

which the issuer has sought preliminary 

ratings or any other form of feedback on 

the transaction to share its view of the 

credit quality of the transaction with the 

Federal Reserve Bank of New York. This 

provision is intended to mitigate the 

credit risk associated with ‘‘rating 

shopping.’’ 

III. Administrative Law Matters 

A. Initial Regulatory Flexibility Analysis 

Congress enacted the Regulatory 

Flexibility Act (RFA) (5 U.S.C. 601 et 

seq.) to address concerns related to the 

effects of agency rules on small entities 

and the Board is sensitive to the impact 

its rules may impose on small entities. 

The RFA requires agencies either to 

provide an initial regulatory flexibility 

analysis with a proposed rule or to 

certify that the proposed rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Under regulations issued by the Small 

Business Administration (SBA), a small 

credit rating agency includes those 

institutions with $7 million in assets.21

In accordance with section 3(a) of the 

RFA, the Board has reviewed the 

proposed rule. An Initial Regulatory 

Flexibility Analysis (IRFA) has been 

prepared in accordance with the RFA.22

The Board encourages comments with 

respect to any aspect of this IRFA, 

including comments with respect to the 

number of small entities that may be 

affected by the proposed rule. 

Comments should specify the costs of 

compliance with the proposed rule and 

suggest alternatives that would 

accomplish the goals of the rules, 

including an estimate of any cost 

savings. Comments will be considered 

in determining whether a Final 

Regulatory Flexibility Analysis (FRFA) 

is required and will be placed in the 

same public file as comments on the 

proposed rule. Comments should be 

submitted to the Board at the addresses 

previously indicated. The Board will 

determine whether a FRFA is necessary 

after consideration of comments 

received during the public comment 

period. 

1. Reasons for the Proposed Action 

As discussed in the preamble above, 

the Board is proposing these rules to 

govern the Federal Reserve Bank of New 

York’s determination of eligibility of 

NRSROs and their credit ratings for use 

in TALF ABS for which the Board has 

established a requirement for collateral 

to be rated by one or more NRSROs. The 

Board anticipates that implementation 

of the proposed rule will permit an 

expansion of the set of NRSROs 

accepted for TALF ABS, while 

maintaining appropriate protection 

against credit risk for the U.S. taxpayer 

in connection with TALF. 

2. Objective 

As discussed in the preamble above, 

the objective of the proposed rule is to 

govern the Federal Reserve Bank of New 

York’s determinations of eligibility of 

particular credit ratings for TALF ABS 

to meet a Board requirement for 

collateral to be rated by one or more 

credit rating agencies. The Board 

intends for the proposed rules to 

provide for an objective, prudent, and 

reasonably consistent process for the 

Federal Reserve Bank of New York to 

determine the eligibility of NRSROs and 

their credit ratings for purposes of TALF 

ABS. 

3. Legal Basis 

Section 11 of the Federal Reserve Act 

(12 U.S.C. 248(j)) authorizes the Board 


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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 51811 

23As noted above, for purposes of this IRFA, the 

Board assumes that there are no more than seven 

NRSROs that would qualify as ‘‘small entities. The 

Board estimates that compiling the necessary 

information and submitting a notice to the Federal 

Reserve Bank of New York should take no more 

than four hours per NRSRO. Total cost was 

estimated using the following formula: percent of 

staff time, multiplied by annual burden hours, 

multiplied by hourly rate (30% Administrative or 

Junior Analyst @ $25, 10% Managerial or Technical 

@ $55, 10% Senior Management @ $100, and 50% 

Legal Counsel @ $144). Hourly rate estimates for 

each occupational group are averages using data 

from the Bureau of Labor and Statistics (BLS), 

Occupational Employment and Wages 2007, http:// 

www.bls.gov/news.release/ocwage.nr0.htm. 

Occupations are defined using the BLS 

Occupational Classification System, http:// 

www.bls.gov/soc/. The total costs are estimated at 

$2,660 if seven small entity NRSROs applied to 

have their ratings accepted for all TALF sectors. 

to exercise general supervision over the 

Reserve Banks. The TALF is authorized 

under section 13(3) of the Federal 

Reserve Act (12 U.S.C. 343). 

4. Small Entities Subject to the Rule 

The proposed rule would establish 

criteria and conditions governing the 

acceptance of credit ratings by the 

Federal Reserve Bank of New York for 

use in TALF. The Board has prepared 

this IRFA in order to determine any 

impact on small entities in order to 

determine if there is a more costeffective manner to accomplish the 

goals of the regulation. 

At present, there are ten NRSROs 

registered with the SEC. Of those ten, 

the Board’s review of publicly available 

information indicates that three 

NRSROs are not ‘‘small entities’’ under 

the RFA because their asset size (or the 

asset size of the NRSRO’s parent 

company) is larger than the level set in 

the SBA regulation. The Board does not 

have access to appropriate non-public 

information on the asset sizes of the 

other NRSROs. For purposes of 

estimating costs for this IRFA, the Board 

will assume that all seven of the 

NRSROs would qualify as a ‘‘small 

entity’’ under the SBA regulations and 

could be indirectly impacted by the 

proposed rule. 

5. Reporting, Recordkeeping, and Other 

Compliance Requirements 

As noted above, the proposed rule 

would leverage off the SEC’s existing 

NRSRO registration process. The Board 

believes that the proposed rule would 

not establish any reporting, 

recordkeeping, or other compliance 

requirements that are not already part of 

the NRSRO registration process or 

involve records that would not 

otherwise be created in the normal 

course of an NRSRO’s business. Other 

than that which is normally required in 

the credit rating agency industry, 

special expertise should not be required 

to compile the information necessary to 

submit an eligibility request to the 

Federal Reserve Bank of New York for 

use of an NRSRO’s credit ratings in 

TALF. An NRSRO that wishes for its 

credit ratings to be accepted for TALF 

would merely have to supply its 

methodology for rating the relevant 

TALF asset sector and document how it 

has the relevant experience issuing 

ratings in the TALF asset sector. Most 

NRSROs should have this information 

readily available in the normal and 

customary course of business. The 

Board estimates that the costs of 

compiling this information and 

submitting a notice to the Federal 

Reserve Bank of New York would be 

nominal.23

The conditions required for the 

Federal Reserve Bank of New York to 

accept ratings from an NRSRO similarly 

also should require minimal 

expenditure of resources. If requested by 

the Federal Reserve Bank of New York, 

an NRSRO may be requested to provide 

information on its continued eligibility 

under the proposed rule. Such 

information, however, would be in 

connection with the eligibility criteria 

in the proposed rule (such as continued 

NRSRO registration with the SEC) and 

should be readily available in the 

normal course of business. An NRSRO 

that has been consulted on a transaction 

in TALF may be requested by the 

Federal Reserve Bank of New York to 

discuss its views of the particular 

transaction, but it would not be required 

to conduct any more analysis than it 

had already conducted in the course of 

its business. 

The Board requests comment on the 

description of burden for compliance 

with the proposed rule described above. 

Commenters should provide identify 

any potential burdens not discussed 

herein, as well as any actual or 

estimated cost data. 

6. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The Board believes that there are no 

federal rules that duplicate, overlap, or 

conflict with the proposed rules. 

7. Significant Alternatives 

Pursuant to section 3(a) of the RFA, 

the Board must consider certain types of 

alternatives, including: (1) The 

establishment of differing compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; (2) the 

clarification, consolidation, or 

simplification of compliance and 

reporting requirements under the rule 

for small entities; (3) the use of 

performance rather than design 

standards; and (4) an exemption from 

coverage of the rule, or any part of the 

rule, for small entities. 

The proposed rule does not establish 

any compliance or reporting 

requirements, including any 

performance or design standards. 

Because the proposed rule provides a 

process through which credit rating 

agencies can have their credit ratings 

accepted by the Federal Reserve Bank of 

New York for purposes of the TALF, the 

Board preliminarily believes that small 

entities that wish to apply should be 

covered by the rule. Like the NRSRO 

registration procedure, the process set 

out in the proposed rule for a credit 

rating agency to have its ratings 

accepted by the Federal Reserve Bank of 

New York is voluntary. 

The Board considered two substantive 

alternatives to the approach adopted in 

the proposed rule. First, the Board 

considered accepting for TALF all 

NRSROs registered with the SEC 

without any further requirements. The 

Board determined that this was not 

prudent as the SEC’s registration 

process did not address the quality of 

credit ratings issued by registered 

NRSROs. In addition, the SEC ABS 

registration does not sufficiently track 

the TALF asset sectors to ensure that 

NRSROs would have experience to rate 

ABS transactions of the type being 

pledged to TALF. The Board also 

considered an approach wherein the 

Federal Reserve Bank of New York 

would conduct an extensive review of 

the methodology and resources of each 

NRSRO applying to be accepted at 

TALF in order to determine whether the 

NRSRO had the expertise and facilities 

to issue ratings suitable for use in each 

of the TALF asset sectors for which the 

NRSRO wished its ratings to be 

accepted. The Board did not propose 

this approach because of the time and 

resources that such in-depth reviews 

would require of the Federal Reserve 

Bank of New York; these resources also 

would likely be diverted away from the 

risk assessment process discussed 

above. The time and resource issue 

would be significant as it would involve 

detailed analysis of multiple NRSROs 

across seven different TALF asset 

sectors. Even with unlimited resources, 

designing the in-depth reviews, 

including the role that subjective 

judgment would play, would require 

time to perfect. TALF is intended as a 

temporary facility and there is the risk 

that the in-depth reviews would take 

longer than the remaining life of TALF. 


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51812 Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 

24 5 CFR 1320.11. The PRA is codified at 44 

U.S.C. 3506 et seq. 

25 5 CFR 1320.11(c). 

8. Request for Comments 

The Board encourages the submission 

of comments on any aspect of the IRFA. 

In addition, the Board specifically 

requests comments on the estimate of 

the number of NRSROs that would be 

considered ‘‘small entities’’ indirectly 

impacted by the proposed rule for 

purposes of the RFA. Commenters that 

disagree with these estimates are 

requested to describe in detail the basis 

for their conclusions and identify the 

sources of any industry statistics they 

relied on to reach their conclusions. The 

Board also requests comment on any 

alternatives to the approach adopted in 

the proposed rule that would 

accomplish the goals of the proposed 

rule in a more cost-effective manner. 

B. Paperwork Reduction Act Analysis 

Office of Management and Budget 

(OMB) regulations implementing the 

Paperwork Reduction Act (PRA) state 

that agencies must submit ‘‘collections 

of information’’ contained in proposed 

rules published for public comment in 

the Federal Register in accordance with 

OMB regulations.24 OMB regulations 

define a ‘‘collection of information’’ as 

obtaining, causing to be obtained, 

soliciting, or requiring the disclosure to 

an agency, third parties or the public of 

information by or for an agency ‘‘by 

means of identical questions posed to, 

or identical reporting, recordkeeping, or 

disclosure requirements imposed on, 

ten or more persons, whether such 

collection of information is mandatory, 

voluntary, or required to obtain or retain 

a benefit.’’ 25

In accordance with the PRA, the 

Board reviewed the proposed rule under 

the authority delegated to the Board by 

OMB. The Federal Reserve may not 

conduct or sponsor, and an organization 

is not required to respond to, this 

information collection unless it displays 

a currently valid OMB control number, 

which will be assigned. The collections 

of information that are proposed to be 

revised by this rulemaking are found in 

subsection 201.3(e)(1)(ii) and (iii) of the 

proposed rule (to be codified at 12 CFR 

201.3(e)(1)(ii) and (iii)). This 

information is required to permit the 

Federal Reserve Bank of New York to 

determine eligibility of credit rating 

agencies to have their ratings accepted 

in TALF in accordance with Board 

regulations. The respondents are 

NRSROs, which may be small entities. 

There is no record retention 

requirement in the proposed rule. 

The estimated burden per response is 

two hours. It is estimated that there will 

be ten respondents providing 

information on a one-time basis. 

Therefore, the total amount of annual 

burden is estimated to be 20 hours. 

The proposed rule in this notice 

implements a threshold requirement of 

registration with the SEC as an NRSRO. 

As noted above, registration with the 

SEC as an NRSRO requires, among other 

things, the completion of the SEC Form 

NRSRO. This form includes exhibits 

regarding a general description of the 

procedures and methodologies used by 

the credit rating agency to determine 

credit ratings for the classes of assets for 

which the credit rating agency is 

seeking registration. The SEC, however, 

already budgets for paperwork burden 

connected with its NRSRO registration 

program. Accordingly, it would be 

redundant for the Board to budget 

additional paperwork burden for the 

SEC’s registration process. 

In addition to NRSRO registration, the 

proposed rule would require the NRSRO 

to submit to the Federal Reserve Bank 

of New York additional information to 

demonstrate that it has sufficient 

expertise and experience to provide 

credit ratings that would assist in the 

Reserve Bank’s risk assessment on the 

most senior classes of newly issued 

asset-backed securities in a particular 

TALF asset sector. The additional 

requirements includes an NRSRO (i) 

having a current and publicly available 

rating methodology specific to assetbacked securities in the particular TALF 

asset sector for which it wishes its 

ratings to be accepted; and (ii) having 

made public or made available to a 

paying subscriber base, since September 

30, 2006, at least ten ratings on U.S. 

dollar-denominated transactions within 

a particular group of complementary 

ABS categories as set out in the 

proposed rule. These requirements are 

found in subsection 201.3(e)(1)(ii) and 

(iii) of the proposed rule (to be codified 

at 12 CFR 201.3(e)(1)(ii) and (iii)). 

The Board believes that each of these 

requirements should require minimal 

effort on the part of an NRSRO. Most 

NRSROs that issue credit ratings for a 

type of asset make public their 

methodology. In addition, it should be 

a relatively simple matter for an NRSRO 

to certify that it has issued ten ratings 

in the appropriate asset category by 

enclosing a list containing the CUSIP 

number and original and current rating 

of the most senior tranche from at least 

ten transactions it has rated within the 

appropriate asset category and 

timeframe. 

Comments are invited regarding (a) 

whether the proposed collection of 

information is necessary for the proper 

performance of the Federal Reserve’s 

functions, including whether the 

information has practical utility; (b) the 

accuracy of the Federal Reserve’s 

estimate of the burden of the proposed 

information collection, including the 

cost of compliance; (c) ways to enhance 

the quality, utility, and clarity of the 

information to be collected; and (d) 

ways to minimize the burden of 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology. Comments on 

the collection of information should be 

sent to Secretary, Board of Governors of 

the Federal Reserve System, 

Washington, DC 20551, with copies of 

such comments to be sent to the Office 

of Management and Budget, Paperwork 

Reduction Project, Washington, DC 

20503. 

C. Plain Language 

Each Federal banking agency, such as 

the Board, is required to use plain 

language in all proposed and final 

rulemakings published after January 1, 

2000. 12 U.S.C. 4809. The Board has 

sought to present the proposed rule, to 

the extent possible, in a simple and 

straightforward manner. The Board 

invites comment on whether there are 

additional steps that could be taken to 

make the proposed rule easier to 

understand, such as with respect to the 

organization of the materials or the 

clarity of the presentation. 

IV. Statutory Authority 

Pursuant to the authority set out in 

the Federal Reserve Act and particularly 

section 11 (codified at 12 U.S.C. 248(j)), 

the Board proposes the rules set out 

below. 

V. Text of Proposed Rule 

List of Subjects in 12 CFR Part 201 

Credit. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Board proposes to amend 

12 CFR Chapter II to read as follows: 

PART 201—EXTENSIONS OF CREDIT 

BY FEDERAL RESERVE BANKS 

(REGULATION A) 

1. The authority citation for part 201 

continues to read as follows: 

Authority: 12 U.S.C. 248(i)–(j), 343 et seq., 

347a, 347b, 347c, 348 et seq., 357, 374, 374a, 

and 461. 

2. In § 201.3, paragraph (e) is added to 

read as follows: 


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Federal Register / Vol. 74, No. 194 / Thursday, October 8, 2009 / Proposed Rules 51813 

§ 201.3 Extensions of credit generally. 

* * * * * 

(e) Credit ratings for Term AssetBacked Securities Loan Facility (TALF). 

(1) If the Board requires that a TALF 

advance, discount, or other extension of 

credit be against collateral (other than 

commercial mortgage-backed securities) 

that is rated by one or more credit rating 

agencies, the Federal Reserve Bank of 

New York may accept the ratings of any 

credit rating agency that: 

(i) Is registered with the Securities 

and Exchange Commission as a 

Nationally Recognized Statistical Rating 

Organization for issuers of asset-backed 

securities; 

(ii) Has a current and publicly 

available rating methodology specific to 

asset-backed securities in the particular 

TALF asset sector (as defined in the 

TALF haircut schedule) for which it 

wishes its ratings to be accepted; and 

(iii) Demonstrates that it has sufficient 

experience to provide credit ratings that 

would assist in the Federal Reserve 

Bank of New York’s risk assessment on 

the most senior classes of newly issued 

asset-backed securities in the particular 

TALF asset sector by having made 

public or made available to a paying 

subscriber base, since September 30, 

2006, ratings on at least ten transactions 

denominated in U.S. dollars within the 

particular category to which the 

particular TALF asset sector is assigned 

as set out below— 

(A) Category 1—auto, floorplan, and 

equipment TALF sectors; 

(B) Category 2—credit card and 

insurance premium finance TALF 

sectors; 

(C) Category 3—mortgage servicing 

advances TALF sector; and 

(D) Category 4—student loans TALF 

sector. 

(2) For purposes of the requirement in 

paragraph (e)(1)(iii) of this section, 

ratings on residential mortgage-backed 

securities may be included in Category 

3 (servicer advances). 

(3) The Federal Reserve Bank of New 

York may in its discretion review at any 

time the eligibility of a credit rating 

agency to rate one or more types of 

assets being offered as collateral. 

(4) Process. 

(i) Credit rating agencies that wish to 

have their ratings accepted for TALF 

transactions should send a written 

notice to the Credit, Investment, and 

Payment Risk group of the Federal 

Reserve Bank of New York including 

information on the factors listed in 

paragraph (e)(1) of this section with 

respect to each TALF asset sector for 

which they wish their ratings to be 

accepted. 

(ii) The Federal Reserve Bank of New 

York will notify the submitter within 5 

business days of receipt of a submission 

whether additional information needs to 

be submitted. 

(iii) Within 5 business days of receipt 

of all necessary information to evaluate 

a credit rating agency pursuant to the 

factors set out in paragraph (e)(1) of this 

section, the Federal Reserve Bank of 

New York will notify the credit rating 

agency regarding its eligibility. 

(5) Conditions. The Federal Reserve 

Bank of New York may accept credit 

ratings under this subsection only from 

a credit rating agency that agrees to— 

(i) Discuss with the Federal Reserve 

its views of the credit risk of any 

transaction within the TALF asset sector 

that has been submitted to TALF and 

upon which the credit rating agency is 

being or has been consulted by the 

issuer; and 

(ii) Provide any information requested 

by the Federal Reserve regarding the 

credit rating agency’s continued 

eligibility under paragraph (e)(1) of this 

section. 

By the Board of Governors of the Federal 

Reserve System, October 5, 2009. 

Jennifer J. Johnson, 

Secretary. 

[FR Doc. E9–24252 Filed 10–7–09; 8:45 am] 

BILLING CODE 6210–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. NM414 Special Conditions No. 

25–09–10–SC] 

Special Conditions: Boeing Model 747– 

8/–8F Series Airplanes; Design Roll 

Maneuver Requirement 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed special 

conditions. 

SUMMARY: This notice proposes special 

conditions for the Boeing Model 747–8/ 

–8F airplane. This airplane will have 

novel or unusual design features when 

compared to the state of technology 

envisioned in the airworthiness 

standards for transport category 

airplanes. These design features include 

an electronic flight control system that 

provides roll control of the airplane 

through pilot inputs to the flight 

computers. These proposed special 

conditions contain the additional safety 

standards that the Administrator 

considers necessary to establish a level 

of safety equivalent to that established 

by the existing airworthiness standards. 

Additional special conditions will be 

issued for other novel or unusual design 

features of the Boeing 747–8/–8F 

airplanes. 

DATES: Comments must be received on 

or before November 9, 2009. 

ADDRESSES: Comments on this proposal 

may be mailed in duplicate to: Federal 

Aviation Administration, Transport 

Airplane Directorate, Attention: Rules 

Docket (ANM–113), Docket No. NM414, 

1601 Lind Avenue, SW., Renton, 

Washington 98057–3356; or delivered in 

duplicate to the Transport Airplane 

Directorate at the above address. All 

comments must be marked Docket No. 

NM414. Comments may be inspected in 

the Rules Docket weekdays, except 

Federal holidays, between 7:30 a.m. and 

4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Todd Martin, FAA, Airframe and Cabin 

Safety Branch, ANM–115, Transport 

Airplane Directorate, Aircraft 

Certification Service, 1601 Lind 

Avenue, SW., Renton, Washington 

98057–3356; telephone (425) 227–1178; 

facsimile (425) 227–1232. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

The FAA invites interested persons to 

participate in this rulemaking by 

submitting written comments, data, or 

views. The most helpful comments 

reference a specific portion of the 

special conditions, explain the reason 

for any recommended change, and 

include supporting data. We ask that 

you send us two copies of written 

comments. 

We will file in the docket all 

comments we receive as well as a report 

summarizing each substantive public 

contact with FAA personnel concerning 

these proposed special conditions. The 

docket is available for public inspection 

before and after the comment closing 

date. If you wish to review the docket 

in person, go to the address in the 

ADDRESSES section of this notice 

between 7:30 a.m. and 4 p.m., Monday 

through Friday, except Federal holidays. 

We will consider all comments we 

receive on or before the closing date for 

comments. We will consider comments 

filed late if it is possible to do so 

without incurring expense or delay. We 

may change the proposed special 

conditions based on comments we 

receive. 

If you want the FAA to acknowledge 

receipt of your comments on this 

proposal, include with your comments 

a pre-addressed, stamped postcard on 

which the docket number appears. We 


srobinson on DSKHWCL6B1PROD with PROPOSALS