REGISTERED LOBBYIST CONTACT DISCLOSURE FORM

This form is to be completed by Executive Branch employees who are contacted by registered lobbyists regarding

EESA. This report includes a written description of each contact, the date and time of the contact, and the names

of the registered lobbyist(s) and the employee(s) with whom the contact took place. Written materials prepared

by registered lobbyists should be attached to this form for posting on the website. The information on this form will

be available to the public on Treasury's website.

To be completed by the employee contacted

Name of the Brief description of the communication: Date and time of contact: Employee(s) Contacted

(Name and Title) (attach separate sheet if necessary)

Friday Oc1.9, 2009 Lori Bettinger Letter to express support of the specific

11:00AM Deputy Director, Equity recommendations to help well-managed, viable banks

Program address their capital needs.

Ted Schaffner

Director, Equity Program

Name of the Employee(s) who prepared this form: Date

Robin J. Brunson 10.13.09

Registered Lobbyist Name: Title: Firm or Organization:, jf Client

applicable

Mark Tenhundfeld Senior Vice President American Bankers

Association
October 9, 2009

The Honorable Timothy Gcithner

Secretary ofthe Treasury

U.S. Department ofthe Treasury

1500 Pennsylvania Avenue, NW

Washington, DC 20220

Dear Secretary Geithner:

The undersigned state bankers associations are writing to express our support ofthe specific

recommendations to help well-managed, viable banks address their capital needs as described in

the attached letter sent to you from ABA Chainnan-Elect Arthur Johnson in September. The

letter identifies several Capital Assistance Program modifications that would help many

traditional banks as they work through the challenges imposed by rising unemployment and

declining property values in their communities.

The recommended CAP changes outlined in the letter are summarized below:

• Invest up to $5 billion of Troubled Asset Relief Program funds in banks that did not

receive Capital Purchase Program funds.

• Limit the maximum Treasury CAP investment in anyone bank to 5% of its risk-weighted

assets.

• Require participating banks to issue Treasury senior preferred securities.

• Require participants to show they have private equity commitments to match Treasury's

investment dollar for dollar.

• Allow any bank with total assets of$5 billion or less to apply, but condition approval on

an acceptable capital restoration plan.

We strongly urge you to consider all ofthe recommendations included in the attached letter.

Sincerely,

Alabama Bankers Association

Arizona Bankers Association

Arkansas Bankers Association

California Bankers Association

Colorado Bankers Association

Connecticut Bankers Association

Delaware Bankers Association

Florida Bankers Association

Georgia Bankers Association

Idaho Bankers Association

Illinois Bankers Association

Illinois League of Financial Institutions

Indiana Bankers Association

Iowa Bankers Association

Kansas Bankers Association

Kentucky Bankers Association

Maryland Bankers Association

Michigan Bankers Association

Minnesota Bankers Association

Mississippi Bankers Association

Missouri Bankers Association

Montana Bankers Association

Nebraska Bankers Association

Nevada Bankers Association
October 9, 2009

Page 2 of2

New Jersey Bankers Association

New Mexico Bankers Association

New York Bankers Association

North Carolina Bankers Association

North Dakota Bankers Association

Ohio Bankers League

Community Bankers Association of Ohio

Oklahoma Bankers Association

Oregon Bankers Association

Pennsylvania Bankers Association

South Carolina Bankers Association

South Dakota Bankers Association

Texas Bankers Association

Utah Bankers Association

Virginia Bankers Association

Washington Bankers Association

Washington Financial League

West Virginia Bankers Association

Wisconsin Bankers Association

Wyoming Bankers Association
I()OOI

AMERICAN

BANKERS

ASSOCIATION I'"

fWorid-C!a.(J" Jo!utirJlfS.

Lmdersbip & ./·ldvo((J()'

Since 1875

Arthur C. Johnson

ChairmanF:Ject, AB/\ &

Chairman and C!?O

United Bank ofi\1ichigan

'I'd: 202-663-5017

r;'ax: 202-663-7533

ajohn;{onC?iJaba.com

1120 Connecticut Avenue, N\V

Washington, DC 20036

1-800-BANKERS

\V\\'W.aba.com

September 21, 2009

The Honorable Timothy Geithner

Secretary of the Treasury

U.S. Department of the Treasury

1500 Pennsylvania Avenue, NW

\,'ashington, DC 20220

Dear Secretary Geithner:

Earlier this year, the American Bankers Association formed a task force to focus on

community bank solutions to the financial crisis. We appreciate the opportunity our

bankers had to meet v,lith several Treasury representatives, and we appreciate

Treasury's recognition of the vital role that community banks play in our financial

system. After those meetings as well as meetings with the bank regulators and

significant discussions internally, we have developed specific recommendations for

ways the existing Capital Assistance Program (CAP) could be modified to assist wellmanaged, viable community banks and therefore be more effective in achieving its

objectives. These recommendations may be summarized as follows:

• Invest up to $5 billion ofTroubled Asset Relief Program (l'AR]» funds in

community banks that did not receive Capital Purchase Program (CPP)

funds;

• Limit the maximum CAP investment by Treasury in anyone bank to 5% of

the bank's risk-weighted assets;

• Require participating banks to issue Treasury senior preferred securities;

• Require participants to show that they have commitments from private

equity to match Treasury's investment dollar for dollar; and

• Allow any bank with total assets of $5 billion or less to apply but condition

approval upon the submission of an aceeptable capital restoration plan.

Background and discussion. Strong capital is essential to helping eommunity

banks work through the problems caused by declines in asset values. While

conditions have improved over the past year in the economy overall, many

community banks are finding that the lagging impacts of job losses and deelines in

property values are negatively affecting these banks, causing declines in their capital

at a time when new eapital often is hard to find.

This problem is compounded by the unintended consequences of policies that have

the effect of steering private investors to failed banks. For instance, the FDIC

announeed in June that, while the Legacy Loans Program remained a viable program,

the ageney intended to scale the program back at least initially to a pilot involving

failed banks. The FDIC announced last week that it had selected a winning bidder in

a sale of receivership assets and that the bidder would receive FDIC-guaranteed

financing. This, coupled with loss-sharing agreements used to entice buyers of failed
banks and tailed bank assets, is creating incentives for investors to wait until a bank has failed before

invesung.

Furthermore, the banking agencies are requiring many banks to raise capital at a time when sources

of capital are scarce and at precisely the time when capital should be available to absorb losses. This

can put these banks in an untenable position, precipitating the failure of a viable bank that has a

good franchise and could survive if capital was made availablel

The ABA recommends that Treasury modify the criteria for its CAP to assist viable community

banks that need help working through their current issues. We propose that Treasury offer

assistance to those banks that did not qualify for CPP funds but that nevertheless can demonstrate

the ability to operate safely and soundly and survive if given the chance to obtain necessary capital.

This ability would be demonstrated in three ways.

• First, a bank would have to present evidence that private investors arc contractually comnutted

to match Treasury's investment dollar for dollar.

• Second, the private investors would have to agree to receive securities that are subordinate to

Treasury's interests.

• Third, the bank would have to submit a capital restoration plan to its primary regulator that,

when factoring in the proposed investments by Treasury and private equity, satisfies the

requirements of the "Prompt Corrective Action" rules.' As part of that plan, the bank also

would have to show that it has adequate management to address its problems.

The suggested aggregate investment by Treasury of $5 billion is based on the amount of funds,

when matched by private equity on a dollar-for-dollar basis, needed to bring all insured depository

institutions with assets under $5 billion to capital levels equal to a Tier 1 risk-based capital ratio of

8% and a total risk-based capital ratio of 12% assuming the stressed scenarios used hy the

hanking regulators in the SeAP These capitallevcls significantly exceed the thresholds

established by the banking regulators for a bank to be deemed "well capitalized'" under the Prompt

Correct Action rules and would provide a cushion that could enable participating banks to continue

meeting the credit needs of their communities without having to shrink to comply \v-ith minimum

regulatory capital requirements. i\ $5 billion commitment by Treasury is well below half of the

dividends and warrant repurchases received by Treasury from CPP participants' and less than 4% of

1 Further information about the role of community banks and the adverse impact that recent governmental ac60ns have

had on these banks is discussed in ~-\ttachment A.

2 See 12 CF.R. § 6.5 (Office of the Comptmller of the Currency); 12 CFR. § 208.44 (Board of Governors of the Federal

Reserve System); 12 C.FR. § 325.104 (Federal Deposit Insurance Corporation); and 12 CF.R. § 565.5 ()ffice of Thrift

Supel·vision).

3 For a bank to be "well capitalized" under the Prompt Corrective I\ction rules, it must have total risk-based capital of at

least 10%; Tier 1 risk-based capital of at least 6%; a leverage ratio of at least 5%; and not be subject to a written

requirement to meet a specific capital level.

4 "The dividends paid on those [CPP] investments and the repurchases of warrants we received for those investments

now total about $12 billion. For the 23 banks that have fully repaid, Treasury has earned. an annualized average return of

roughly 17 percent." Secretary of the Treasury F. Geithner, \'X!ritten Testimony before the Congressional

(}versight Panel, September 10, 2009 (available at 1illj;0'i.:oO'i\'~lli[£;!lgill:L.l2.~W':l.\:wi!;Ulg,~ill!!ll).

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the total of CPP funds invested to date. 5 Our projections show that an estimated 2,000 community

banks would be potentially eligible (see Attachment B), altbough it is highly unlikely that all 2,000

would cboose to, or be approved to, participate.

As noted above, this program would involve matching investments by private equity investors. It is

important that private equity qualify regardless of whether it comes from existing shareholders or

nc\v investors. Either way, the bank is receiving a strong vote of confidence in its viability from

stakeholders \vho stand to lose their investments. 11oreover, current investors and management

often are in the best position to judge the prospects of a bank and to determine the advisability of

investing in that bank.

We believe that, as a general malter, Treasury could adopt as many of the terms used in the CPP as

would be relevant. Thus, for instance, Treasury would receive the same sort of securities, subject to

the same conditions, as it has received through the CPl'. To make this workable for community

banks, we propose twO exceptions to this general approach, however. r':"ir5t, given that these funds

are intended for viable yet struggling community banks, we believe it would be appropriate for

Treasury to agree that any approved banks would not be expected to pay dividends in the first four

quarters following Treasury's in,restment. Second, we renew our request, first raised in the context

of the CPP,' that investments in S corporations and mutual institutions that do not have holding

companies be treated as Tier 1 capital. It is our understanding that these banks' interest in the cpp

was significantly diminished hy the treatment of CPP investments as Tier 2 capital.

\ve very much appreciate your consideration of these recommendations. Community banks are the

backbone of our economy and are critical to the overall improvement of our economy. For a

nominal investment, Treasury can preserve viable community banks, which in turn would preserve

jobs and communities. As the former Comptroller Eugene Ludwig wrote in an op-ed on Friday,

September 18, 2009 in the American Banker, "Now is the time for regulators to work with the wellmanaged community banks wherever possible to raise capital and dispose of troubled assets.

Regulators must look for ways to help these institutions rather than find reasons to close them."

We would be happy to provide any further information or assistance that you would find helpful.

Sincerely,

ArthurJohnson

cc: The Han. Sheila Bair, Chairman, Federal Deposit Insurance Corporation

The Hon. Ben Bernanke, Chairman, Board of Governors of the Federal Reserve System

Mr. John Bowman, Acting Director, Office ofThrift Supervision

The Hon. John Dugan, Comptroller of the Currency

As reported on the Transactions Report for the period ending September 4, 2009, Treasury has invested slightly over

$134 billion through the CPP. 5ee )JJ1:UJ::,,"!2idiD.llilQ1"Slilii)JJ1~'i.LUru;.Ullillllig]<2frm>Q£LSLmulli£lli=

r£120rt 09092(109.pdf.

(; See Letter from Diane Casey-Landry to the Hon. Timothy F. Geithner, dated April 16, 2009.

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