Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Rules and Regulations 26941 

PART 324—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: WOMEN WHO HAVE 

LOST UNITED STATES CITIZENSHIP 

BY MARRIAGE AND FORMER 

CITIZENS WHOSE NATURALIZATION 

IS AUTHORIZED BY PRIVATE LAW 

■ 69. The authority citation for part 324 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1435, 1443, 1448, 

1101 note. 

§ 324.2 [Amended] 

■ 70. Section 324.2 is amended by 

removing the final sentence of 

paragraph (b). 

§ 324.3 [Amended] 

■ 71. Section 324.3 is amended by: 

■ a. Removing the phrase ‘‘the office of 

the Service having jurisdiction over her 

place of residence as evidence of her 

desire to take the oath’’ in paragraph 

(b)(1) and adding in its place ‘‘USCIS in 

accordance with the instructions on the 

form.’’; 

■ b. Removing the phrase ‘‘the district 

director’’ in paragraph (b)(2) and adding 

in its place ‘‘USCIS’’; 

■ c. Removing the phrase ‘‘the Service’’ 

in paragraph (b)(2) and adding in its 

place ‘‘USCIS’’. 

§ 324.4 [Amended] 

■ 72. Section 324.4 is amended by 

removing the phrase ‘‘office of the 

Service’’ and adding in its place ‘‘USCIS 

office’’. 

§ 324.5 [Amended] 

■ 73. Section 324.5 is amended by 

removing the phrase ‘‘the Service’’ 

wherever it appears and adding in its 

place ‘‘USCIS’’. 

PART 327—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: PERSONS WHO LOST 

UNITED STATES CITIZENSHIP 

THROUGH SERVICE IN ARMED 

FORCES OF FOREIGN COUNTRY 

DURING WORLD WAR II 

■ 74. The authority citation for part 327 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1438, 1443. 

§ 327.2 [Amended] 

■ 75. Section 327.2 is amended by 

removing the phrase ‘‘, to the Service 

office having jurisdiction over the 

applicant’s place of residence’’ in the 

first sentence of paragraph (a). 

PART 328—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: PERSONS WITH 

THREE YEARS’ SERVICE IN ARMED 

FORCES OF THE UNITED STATES 

■ 76. The authority citation for part 328 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1439, 1443. 

§ 328.3 [Removed and Reserved] 

■ 77. Section 328.3 is removed and 

reserved. 

PART 329—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: NATURALIZATION 

BASED UPON ACTIVE DUTY SERVICE 

IN THE UNITED STATES ARMED 

FORCES DURING SPECIFIED 

PERIODS OF HOSTILITIES 

■ 78. The authority citation for part 329 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1440, 1443; 8 

CFR part 2. 

§ 329.3 [Removed and Reserved] 

■ 79. Section 329.3 is removed and 

reserved. 

§ 329.5 [Amended] 

■ 80. Section 329.5 is amended by 

removing and reserving paragraph (c). 

PART 330—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: SEAMEN 

■ 81. The authority citation for part 330 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1443. 

§ 330.2 [Amended] 

■ 82. Section 330.2 is amended by 

adding a period immediately after the 

phrase ‘‘An applicant for naturalization 

under section 330 of the Act must 

submit an Application for 

Naturalization, Form N–400’’ and 

removing the remaining text in 

paragraph (a). 

PART 334—APPLICATION FOR 

NATURALIZATION 

■ 83. The authority citation for part 334 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1443. 

§ 334.1 [Amended] 

■ 84. Section 334.1 is amended by 

removing the phrase ‘‘at the Service 

office indicated in the appropriate part 

of this chapter’’ and adding in its place 

‘‘in accordance with the instructions on 

the form’’. 

§ 334.11 [Amended] 

■ 85. Section 334.11 is amended by 

removing the phrase ‘‘with the Service 

office having jurisdiction over the 

applicant’s place of residence in the 

United States’’ from the second sentence 

of paragraph (a). 

PART 392—SPECIAL CLASSES OF 

PERSONS WHO MAY BE 

NATURALIZED: PERSONS WHO DIE 

WHILE SERVING ON ACTIVE DUTY 

WITH THE UNITED STATES ARMED 

FORCES DURING CERTAIN PERIODS 

OF HOSTILITIES 

■ 86. The authority citation for part 392 

continues to read as follows: 

Authority: 8 U.S.C. 1103, 1440 and note, 

and 1440–1; 8 CFR part 2. 

§ 392.3 [Amended] 

■ 87. Section 392.3(b)(1), is amended by 

adding a period immediately after the 

phrase ‘‘An application for posthumous 

citizenship must be submitted by mail 

on Form N–644’’ and removing the 

remaining text from the first sentence 

and removing the second sentence. 

Janet Napolitano, 

Secretary. 

[FR Doc. E9–13014 Filed 6–4–09; 8:45 am] 

BILLING CODE 9111–97–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 370 

RIN 3064–AD37 

Modification of Temporary Liquidity 

Guarantee Program 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is issuing this Final 

Rule to make permanent a minor 

modification to the Temporary Liquidity 

Guarantee Program (TLGP) to include 

certain issuances of mandatory 

convertible debt (MCD) under the TLGP 

debt guarantee program (DGP). 

DATES: The final rule becomes effective 

on June 5, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Steven Burton, Senior Financial 

Analyst, Bank and Regulatory Policy 

Section, Division of Insurance and 

Research, (202) 898–3539 or 

sburton@fdic.gov; Robert C. Fick, 

Counsel, Legal Division, (202) 898–8962 

or rfick@fdic.gov; A. Ann Johnson, 

Counsel, Legal Division (202) 898–3573 

or aajohnson@fdic.gov; Mark L. 

Handzlik, Senior Attorney, Legal 

Division, (202) 898–3990 or 

mhandzlik@fdic.gov; Gail Patelunas, 

Deputy Director, Division of Resolutions 


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26942 Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Rules and Regulations 

1 74 FR 9522 (March 4, 2009). 

2This modification of the TLGP is supported by 

the rationale for establishing the existing TLGP and 

is consistent with the determination of systemic 

risk made on October 14, 2008, pursuant to 12 

U.S.C. section 1823(c)(4)(G), by the Secretary of the 

Treasury (after consultation with the President) 

following receipt of the written recommendation 

dated October 13, 2008, of the FDIC’s Board of 

Directors (Board) and the similar written 

recommendation of the Federal Reserve. 

3 74 FR 12078 (March 23, 2009). 4See 26 U.S.C. 163. 

and Receiverships, (202) 898–6779 or 

gpatelunas@fdic.gov; (for questions or 

comments related to MCD applications): 

Lisa D Arquette, Associate Director, 

Division of Supervision and Consumer 

Protection, (202) 898–8633 or 

larquette@fdic.gov; or Donna Saulnier, 

Manager, Assessment Policy Section, 

Division of Finance, (703) 562–6167 or 

dsaulnier@fdic.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On October 23, 2008 the FDIC’s Board 

of Directors (Board) adopted the TLGP 

as part of a coordinated effort by the 

FDIC, the U.S. Department of the 

Treasury (Treasury), and the Board of 

Governors of the Federal Reserve 

System (Federal Reserve) to address 

unprecedented disruptions in credit 

markets and the resultant effects on the 

ability of financial institutions to fund 

themselves and make loans to 

creditworthy borrowers. The TLGP and 

other government programs have had 

favorable effects thus far; however the 

FDIC continues to evaluate ways to 

make the TLGP more effective. 

On February 27, 2009 the Board 

adopted an Interim Rule that modified 

the then-existing DGP by extending the 

FDIC guarantee to certain new issues of 

MCD.1 The purpose of the Interim Rule 

was to provide a mechanism for entities 

participating in the DGP to obtain 

funding from investors that may have a 

longer-term investment horizon. By 

providing a guarantee for senior 

unsecured debt that converts into 

common shares of the issuer, the FDIC 

expects the Interim Rule to moderate the 

potential funding needs that could 

result from concentrations of FDICguaranteed debt maturing in mid-2012.2

The FDIC solicited public comment on 

all aspects of the Interim Rule for a 15- 

day comment period. 

On March 17, 2009, the Board 

adopted an interim rule entitled 

Amendment Of The Temporary 

Liquidity Guarantee Program To Extend 

The Debt Guarantee Program And To 

Impose Surcharges On Assessments For 

Certain Debt Issued On Or After April 1, 

2009 3 (Extension Interim Rule), which 

further amended the DGP by, among 

other things, extending the duration of 

the DGP for certain participating 

entities, imposing surcharges on the 

issuance of certain FDIC-guaranteed 

debt, and providing for the issuance of 

non-guaranteed debt prior to the 

expiration of the DGP. On May 19, 2009 

the Board adopted the Extension Interim 

Rule as a final rule without change. That 

final rule (Extension Final Rule) is being 

published simultaneously today 

elsewhere in the Federal Register. 

II. The Interim Rule 

The Interim Rule amended section 

370.2(e)(5) to permit entities 

participating in the DGP to issue certain 

MCD upon application to and approval 

from the FDIC. The Interim Rule did not 

affect an entity’s existing debt guarantee 

limit. 

As provided in section 370.2(e) of the 

Interim Rule, FDIC-guaranteed MCD 

must be newly issued on or after 

February 27, 2009 and provide, in the 

debt instrument, for the mandatory 

conversion of the debt into common 

shares of the issuing entity on a 

specified date (unless the issuing entity 

fails to timely make any payment 

required under the debt instrument, or 

merges or consolidates with any other 

entity and is not the surviving or 

resulting entity). The Interim Rule also 

required an entity issuing MCD to 

provide certain disclosures to investors. 

As indicated in the Interim Rule, a 

participating entity must file a written 

application with the FDIC and its 

appropriate Federal banking agency, 

and obtain the FDIC’s prior written 

approval, before issuing MCD. Like 

other applications required for purposes 

of the DGP, an entity seeking to issue 

MCD must include the details of the 

request, a summary of the applicant’s 

strategic operating plan, and a 

description of the proposed use of the 

debt proceeds. The application also 

must provide the proposed date of 

issuance, the amount of MCD to be 

issued, the mandatory conversion date, 

and the conversion rate (as described in 

Section 370.3(h)). Where the issuance of 

MCD could potentially raise control 

issues, the applicant must provide 

written confirmation that all 

applications and all notices required 

under the Bank Holding Company Act 

of 1956 (as amended), the Home 

Owners’ Loan Act (as amended), or the 

Change in Bank Control Act (as 

amended) have been submitted to the 

appropriate Federal banking agency 

prior to issuing MCD. 

Assessments for FDIC-guaranteed 

MCD are based on the time period from 

the issue date of the MCD until its 

mandatory conversion date. 

III. Summary of Comments 

The FDIC received eight comments on 

the Interim Rule from banking 

organizations, trade and industry 

groups, and certain individuals. The 

commenters generally supported the 

Interim Rule in that it would provide 

participating entities the flexibility 

needed to attract a broader group of 

investors, including those with longerterm investment horizons. 

Several commenters encouraged the 

FDIC to revise the Interim Rule by 

making structural enhancements to 

MCD so that it would qualify for the 

Federal interest rate tax deduction, as 

provided under the Internal Revenue 

Code.4 For example, the commenters 

suggested revising the Rule to provide 

for a mandatory unit structure, where 

remarketed debt proceeds are used to 

fund share purchases under a separate 

forward-purchase contract, and senior 

unsecured debt that converts to equity 

at the option of the investor. However, 

these structures contain certain features 

(such as the bundling of debt with a 

futures contract, the pledge of debt 

against the forward contract, possible 

contingencies related to debt 

remarketing efforts, and optionality 

pertaining to the conversion of debt to 

common shares of the issuer) that would 

make them ineligible for an FDIC 

guarantee. 

Pursuant to the Interim Rule, the 

underlying debt instrument must, by its 

terms, provide for the conversion of the 

debt into the common shares of the 

issuing entity on a specified date. This 

modification of the DGP was intended 

to attract investors with longer-term 

investment horizons and reduce 

potential refinancing risks, and not to 

expand the definition of senior 

unsecured debt to include hybrid debt 

and equity securities with complex 

structures. 

Some commenters encouraged the 

FDIC to coordinate with the Federal 

Reserve to permit MCD to qualify as 

Tier 1 capital. MCD issued under the 

DGP is not includable in the regulatory 

capital of a participating entity until 

such MCD converts to the common 

stock of such entity. The FDIC does not 

wish to consider or pursue exceptions to 

the existing regulatory capital 

framework for purposes of the TLGP. 

Notwithstanding the regulatory capital 

treatment for MCD, however, the FDIC 

believes that FDIC-guaranteed MCD 

provides significant benefits to issuers 

and investors in that such debt can be 

expected to offer higher coupon rates 

than other senior unsecured debt issues 


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Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Rules and Regulations 26943 

without a mandatory conversion feature. 

Also, for participating entities, the 

ability to issue MCD should facilitate 

liquidity and capital planning to the 

extent the conversion feature offsets the 

need to obtain new financing upon the 

expiration of the FDIC’s guarantee. 

Several commenters sought 

clarification on the scope of the FDIC 

guarantee with respect to MCD, and 

urged the FDIC to confirm (i) that the 

guarantee would cover scheduled 

payments of principal and interest 

through maturity even in the event of a 

bankruptcy, conservatorship, or 

receivership, and (ii) that investors 

would be made whole in the event they 

do not receive equity shares on the date 

of conversion. 

The FDIC’s obligation under the 

guarantee for MCD is basically the same 

as it is for any other FDIC-guaranteed 

debt. Generally, the FDIC will make 

scheduled payments of principal and 

interest pursuant to the terms of the 

debt instrument upon a ‘‘payment 

default’’ which is defined as the 

uncured failure of the issuing entity to 

make a timely payment of principal or 

interest required under the debt 

instrument. Therefore, it is irrelevant 

whether the payment default results 

from bankruptcy, conservatorship, 

receivership or some other event. The 

FDIC’s guarantee protects investors 

when there has been a payment default 

whether or not there has been a 

bankruptcy, a conservatorship, or a 

receivership of the issuing entity. 

The Interim Rule states that the FDIC 

will make scheduled payments of 

principal and interest ‘‘through 

maturity.’’ Since MCD does not 

necessarily have a stated ‘‘maturity’’ 

date, the Final Rule makes clear that in 

the event of a payment default on MCD, 

the FDIC will make scheduled payments 

of principal and interest pursuant to the 

terms of the debt instrument through the 

mandatory conversion date. 

With regard to the comment 

suggesting that the FDIC clarify that 

investors would be made whole in the 

event they do not receive equity shares 

on the date of conversion, the FDIC 

believes that the Interim Rule 

adequately describes the operation of 

the FDIC’s guarantee obligation in the 

event of a payment default. Specifically, 

upon a payment default, the FDIC will 

make scheduled payments of principal 

and interest pursuant to the terms of the 

debt instrument through the mandatory 

conversion date. Failure to deliver 

shares on the conversion date would not 

necessarily constitute a ‘‘payment 

default.’’ However, the FDIC anticipates 

that the debt instrument for MCD will 

require a payment of the unpaid 

principal on the conversion date in the 

event of a payment default. To the 

extent that the debt instrument provides 

that a principal payment is due on the 

conversion date in the event of a 

payment default, the FDIC would make 

that principal payment subject to the 

limitation that the principal payment 

cannot exceed the amount paid by 

holders of the MCD under the issuance. 

As a result, the Final Rule does not 

make any changes to the Interim Rule 

with respect to that issue. 

The following example illustrates 

how the Final Rule would operate in the 

event of a payment default on FDICguaranteed MCD after the bankruptcy of 

the issuer. Assume that a bank holding 

company (with the prior approval of the 

FDIC) issues MCD in which the note 

provides for monthly payments of 

interest for each of the seventeen 

months after the issue date. Assume also 

that the note provides that upon the 

eighteenth month the principal amount 

of the note shall convert to the common 

stock of the issuer unless there is a 

payment default. Finally, assume that in 

the event of a payment default the note 

requires that the issuer pay the debt 

holder the unpaid principal on the 

conversion date. If a petition in 

bankruptcy is filed against the issuer 

just prior to the twelfth month, but no 

payment default occurs until the 

fourteenth month, the FDIC would 

satisfy its guarantee obligation by 

making all payments of interest 

scheduled for months fourteen through 

seventeen. The FDIC also would pay to 

the holder of the note the unpaid 

principal amount, not to exceed the 

amount paid for the debt by the holder, 

on the conversion date (the eighteenth 

month). 

One of the commenters also asked the 

FDIC to protect investors against losses 

resulting from government interventions 

short of placing issuing institutions into 

receivership. As described by the 

commenter, an example would include 

a situation where a federal agency 

directly acquired, or acquired the right 

to receive (through warrants or other 

convertible securities) more than onethird of the common stock of an entity 

that has received approval to issue 

MCD. Several commenters also asked 

the FDIC to consider expanding the 

guarantee to cover any amount of the 

original investment (of principal) that is 

not recovered upon conversion. The 

FDIC does not wish to extend its 

guarantee to cover situations that do not 

involve payment default by the issuer. 

Such a change would protect investors 

against investment losses attributable to 

declines in the value of the convertible 

debt instrument, as opposed to losses 

related to an actual default on the 

underlying obligation. 

Two commenters urged the FDIC to 

revise the Interim Rule by eliminating 

the prior application requirement for 

issuing MCD, thereby allowing 

participating entities to issue MCD at 

their own discretion. As provided in the 

Interim Rule and under the Final Rule, 

the FDIC will review applications to 

issue MCD on a case-by-case basis to 

ensure that the transaction will meet the 

requirements of the DGP, and confirm 

that all applicable applications and 

notices have been submitted to the 

appropriate Federal banking agency 

where the transaction could present a 

change in control issue. 

Several commenters encouraged the 

FDIC to allow entities that issue MCD to 

use the proceeds of the issuance to 

replace other non-FDIC guaranteed debt 

and other regulatory capital 

instruments, such as Capital Purchase 

Program (CPP) obligations. The FDIC 

does not believe it is appropriate to 

allow participating entities to use the 

proceeds of FDIC-guaranteed debt to 

prepay non-FDIC guaranteed obligations 

because such prepayments would be 

inconsistent with one of the primary 

objectives of the DGP, which is to 

encourage participating entities to lend 

to creditworthy borrowers. 

One commenter urged the FDIC to 

revise the Interim Rule to permit 

subsidiaries of holding companies to 

issue MCD that, under the terms of the 

debt instrument, converts to the 

common stock of an affiliate. Such a 

provision would allow holding 

companies to effectively use the debt 

guarantee limit of an insured depository 

institution subsidiary for the holding 

company’s own capital planning 

purposes. The FDIC is concerned that 

this type of funding arrangement could 

ultimately benefit the holding company 

at the expense of the insured depository 

institution subsidiary, where the 

depository institution could be forced to 

seek replacement funding once the debt 

converts to the common stock of the 

holding company. Accordingly, the 

FDIC will only approve applications to 

issue MCD that, by its terms, requires 

conversion of the debt into common 

stock of the issuing entity on a specified 

conversion date. 

Commenters also sought additional 

flexibility in determining the debt 

guarantee limit for bank holding 

companies. Specifically, the 

commenters suggested revising the 

Interim Rule to permit a bank holding 

company to issue senior unsecured debt 

up to the amount that is permissible for 

an insured depository institution 

subsidiary, or provide a separate debt 


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26944 Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Rules and Regulations 

5See 74 FR 12078 (March 23, 2009). 

6 Id. 

7See SUPPLEMENTARY INFORMATION, Section I. 

Background. 

8 12 U.S.C. 4802. 

9 5 U.S.C. 801 et seq. 

10Pub. L. 96–354, Sept. 19, 1980. 

guarantee limit for bank holding 

companies based on a delineated 

percentage of liabilities or risk-weighted 

assets. Two other commenters 

encouraged the FDIC to modify the 

TLGP in a way that would permit 

eligible entities to use the TLGP for 

purposes of raising capital. One of these 

commenters suggested revising the 

definition of senior unsecured debt to 

include trust preferred securities and 

subordinated debentures. 

Under the TLGP, debt guarantee 

limits are based on the liquidity needs 

of an entity as determined by senior 

unsecured debt outstanding on 

September 30, 2008 (or 2 percent of 

liabilities for insured depository 

institutions without any outstanding 

senior unsecured debt on September 30, 

2008). Although the Interim Rule 

provides an opportunity to attract future 

capital in the form of common equity, 

the purpose of the TLGP is not to 

recapitalize the banking industry. The 

FDIC notes that capital deficiencies are 

being addressed by other government 

programs and initiatives, such as the 

Troubled Asset Relief Program (TARP) 

and the CPP. 

Another commenter requested a 

second opportunity to opt-into the 

TLGP, in light of the modifications to 

the DGP provided under the Interim 

Rule. The FDIC notes that on March 17, 

2009, the Board approved an Interim 

Rule that extends the DGP and imposes 

surcharges on assessments for certain 

debt issued on or after April 1, 2009 (the 

Extension Rule).5 One of the purposes of 

the DGP extension is to ensure an 

orderly phase-out of the TLGP. 

Providing a second opportunity to optinto the DGP would be contrary to that 

effort. Further, the FDIC believes the 

TLGP has provided reliable and costefficient liquidity support to financial 

institutions with demonstrated funding 

needs. Institutions that have elected to 

opt-out of the TLGP are less likely to 

have such funding needs and, therefore, 

the FDIC believes that providing a 

second opportunity to opt-into the DGP 

would be of marginal benefit to the 

industry. 

Finally, one commenter suggested 

revising the DGP to permit mutual 

banking organizations to issue MCD, on 

the condition that such organizations 

would convert to stock form on or 

before the conversion date. According to 

the commenter, this would allow 

mutual banks to raise capital now while 

they convert to stock form. The FDIC 

notes that mutual banking organizations 

must obtain regulatory approval to 

convert to a stock form of ownership, 

and that FDIC-guaranteed MCD is not 

recognized as regulatory capital until 

the debt converts into common equity of 

the issuer. In addition, the purpose of 

the TLGP is not to create incentives that 

would promote one form of ownership 

structure over another. 

Although the FDIC received a few 

other comments in connection with the 

Interim Rule, they were either unrelated 

to the substance of the Interim Rule or 

applicable to the Extension Rule 

approved by the Board on March 17, 

2009, which provides for a limited, fourmonth extension of the DGP.6

IV. Final Rule 

The Interim Rule generally permits 

entities participating in the DGP to issue 

FDIC-guaranteed MCD upon application 

to and approval from the FDIC. FDICguaranteed MCD must, in the debt 

instrument, provide for the mandatory 

conversion of the debt into the common 

equity of the issuer on a specified date, 

which must be on or before the 

expiration of the FDIC’s guarantee. 

This Final Rule adopts the Interim 

Rule (as amended by the final rule 

entitled Amendment Of The Temporary 

Liquidity Guarantee Program To Extend 

The Debt Guarantee Program And To 

Impose Surcharges On Assessments For 

Certain Debt Issued On Or After April 1, 

2009 which was issued by the Board on 

May 19, 2009) with one change.7

Because MCD does not have a maturity 

date as such, this Final Rule clarifies 

that, with respect to MCD, the FDIC 

guarantee covers scheduled payments of 

principal and interest through the date 

of conversion. 

VI. Regulatory Analysis and Procedure 

A. Administrative Procedure Act 

The process of amending Part 370 by 

means of this Final Rule is governed by 

the Administrative Procedure Act 

(APA). Pursuant to Section 553(b)(B) of 

the APA, general notice and opportunity 

for public comment are not required 

with respect to a rule making when an 

agency for good cause finds that ‘‘notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest.’’ Similarly, 

Section 553(d)(3) of the APA provides 

that an agency, for good cause found 

and published with the rule, does not 

have to comply with the requirement 

that a substantive rule be published not 

less than 30 days before its effective 

date. When it issued the Interim Rule, 

the FDIC invoked these good cause 

exceptions based on the unprecedented 

disruption of the credit markets that has 

occurred as a result of the severe 

financial conditions that threaten the 

nation’s economy and the stability of 

the banking system. For this same 

reason, the FDIC invokes the good cause 

exceptions with respect to the Final 

Rule. 

B. Riegle Community Development and 

Regulatory Improvement Act 

The Riegle Community Development 

and Regulatory Improvement Act 

provides that any new regulations or 

amendments to regulations prescribed 

by a Federal banking agency that impose 

additional reporting, disclosures, or 

other new requirements on insured 

depository institutions shall take effect 

on the first day of the calendar quarter 

which begins on or after the date on 

which the regulations are published in 

final form, unless the agency 

determines, for good cause published 

with the rule, that the rule should 

become effective before such time.8

The FDIC invoked the good cause 

exception for purposes of the Interim 

Rule because of the unprecedented 

disruption of the credit markets that has 

occurred as a result of the severe 

financial conditions that threaten the 

nation’s economy and the stability of 

the banking system. The FDIC had 

determined that any delay of the 

effective date for the Interim Rule would 

have had serious adverse effects on the 

economy and the stability of the 

financial system. For these same 

reasons, the FDIC invokes the good 

cause exception for purposes of the 

Final Rule. 

C. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

(OMB) has previously determined that 

the Interim Rule is not a ‘‘major rule’’ 

within the meaning of the relevant 

sections of the Small Business 

Regulatory Enforcement Act of 1996 

(SBREFA).9 The OMB also has 

determined that this Final Rule is not a 

‘‘major rule’’ within the meaning of the 

SBREFA. 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(RFA)10 requires an agency to prepare a 

final regulatory flexibility analysis when 

an agency promulgates a final rule 

under section 553 of the APA, after 

being required by that section to publish 

a notice of proposed rulemaking. 

Because the FDIC has invoked the good 


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Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Rules and Regulations 26945 

11 44 U.S.C. 3501 et seq. 

cause exception provided for in section 

553(b)(B) of the APA, with respect to 

this Final Rule, the RFA’s requirement 

to prepare a final regulatory analysis 

does not apply. 

E. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995,11 an agency may 

not conduct or sponsor, and a person is 

not required to respond to, a collection 

of information unless it displays a 

currently valid OMB control number. 

The Final Rule, as did the Interim Rule, 

includes in sections 370.3(h)(1)(v) and 

370.3(h)(2) a requirement for 

submission of an application setting 

forth certain specific items of 

information for institutions seeking to 

issue FDIC-guaranteed MCD. On 

February 27, 2009, the FDIC requested 

and received approval under OMB’s 

emergency clearance procedures to 

revise its existing collection of 

information entitled, ‘‘Temporary 

Liquidity Guarantee Program’’ (OMB 

Control No. 3064–0166), to incorporate 

the paperwork burden associated with 

applications to issue MCD. 

The Interim Rule requested comments 

on the paperwork burden associated 

with applications to issue MCD, and 

only one such comment was received. 

The commenter suggested that in lieu of 

the extra paperwork burden created by 

the application requirement, the FDIC 

should allow institutions to issue MCD 

at their own discretion, limited only by 

their debt issuance caps. As noted in the 

Summary of Comments section of the 

preamble, the information submitted in 

applications allows the FDIC to ensure 

that proposed transactions will meet the 

requirements of the DGP and confirm 

that all applicable applications and 

notices have been submitted to the 

appropriate Federal banking agency in 

cases where the transaction could 

present a change in control issue. 

Accordingly, the FDIC declines to adopt 

that suggestion. 

On March 11, 2009, the FDIC began 

the process for normal clearance of the 

Temporary Liquidity Guarantee Program 

information collection, including 

applications to issue MCD, with 

publication of an initial 60-day notice 

requesting comment on: (1) Whether 

this collection of information is 

necessary for the proper performance of 

the FDIC’s functions, including whether 

the information has practical utility; (2) 

the accuracy of the estimates of the 

burden of the information collection, 

including the validity of the 

methodologies and assumptions used; 

(3) ways to enhance the quality, utility, 

and clarity of the information to be 

collected; and (4) ways to minimize the 

burden of the information collection on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology; 

and (5) estimates of capital or start up 

costs, and costs of operation, 

maintenance and purchase of services to 

provide the information. The comment 

period ended on May 11, 2009, and no 

comments were received. It will be 

followed by publication of a second 

Federal Register notice, with a 30-day 

comment period, of the FDIC’s 

submission to OMB of its request for full 

clearance the collection. Interested 

parties are invited to submit written 

comments during the 30-day period on 

the estimated burden for applications to 

issue MCD or any other aspect of the 

Temporary Liquidity Guarantee Program 

information collection by any of the 

following methods: http:// 

www.FDIC.gov/regulations/laws/ 

federal/propose.html. 

• E-mail: comments@fdic.gov. 

Include the name and number of the 

collection in the subject line of the 

message. 

• Mail: Leneta Gregorie (202–898– 

3719), Counsel, Federal Deposit 

Insurance Corporation, 550 17th Street, 

NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand-delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street), on business days 

between 7 a.m. and 5 p.m. 

A copy of the comment may also be 

submitted to the OMB Desk Officer for 

the FDIC, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, New 

Executive Office Building, Room 3208, 

Washington, DC 20503. All comments 

should refer to the name and number of 

the collection. 

The burden estimate for the 

application to issue FDIC-guaranteed 

mandatory convertible debt is as 

follows: 

Title: Temporary Liquidity Guarantee 

Program. 

OMB Number: 3064–0166. 

Frequency of Response: 5. 

Estimated Number of Respondents: 

25. 

Average Time for Response: 1 hour. 

Estimated Annual Burden: 125 hours. 

Previous Annual Burden: 2,201,550 

hours. 

Total New Burden: 2,201,675 hours. 

List of Subjects in 12 CFR Part 370 

Banks, Banking, Bank deposit 

insurance, Holding companies, National 

banks, Reporting and recordkeeping 

requirements, Savings associations. 

■ Accordingly, the Interim Rule 

amending 12 CFR part 370 which was 

published at 74 FR 9522 on March 4, 

2009 is adopted as a final rule with the 

following change: 

PART 370—TEMPORARY LIQUIDITY 

GUARANTEE PROGRAM 

■ 1. The authority citation for part 370 

shall continue to read as follows: 

Authority: 12 U.S.C. 1813(l), 1813(m), 

1817(i), 1818, 1819(a)(Tenth), 1820(f), 

1821(a), 1821(c), 1821(d), 1823(c)(4). 

■ 2. In part 370, amend section 370.12 

by revising paragraph (b)(2) as follows: 

§ 370.12 Payment on the guarantee. 

* * * * * 

(b) Payments on Guaranteed Debt of 

participating entities in default. 

(1) * * * 

(2) Method of payment. Upon the 

occurrence of a payment default, the 

FDIC shall satisfy its guarantee 

obligation by making scheduled 

payments of principal and interest 

pursuant to the terms of the debt 

instrument through maturity, or in the 

case of mandatory convertible debt, 

through the mandatory conversion date 

(without regard to default or penalty 

provisions). Any principal payment on 

mandatory convertible debt shall be 

limited to amounts paid by holders 

under the issuance. The FDIC may in its 

discretion, at any time after the 

expiration of the guarantee period, elect 

to make a final payment of all 

outstanding principal and interest due 

under a guaranteed debt instrument 

whose maturity extends beyond that 

date. In such case, the FDIC shall not be 

liable for any prepayment penalty. 

* * * * * 

By order of the Board of Directors. 

Dated at Washington, DC, this 29th day of 

May 2009. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E9–13083 Filed 6–4–09; 8:45 am] 

BILLING CODE 6714–01–P 


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