Today, the Treasury Department and other bank regulators published guidelines, an application form, and other information for financial institutions seeking to participate in the Capital Purchase Program ("CCP") announced last week. The application process includes financial institutions in addition to the nine participants originally named last week, as discussed below.

The materials released today confirm that the CCP will be open to bank holding companies, financial holding companies, insured depository institutions, and savings and loan holding companies that engage solely or predominately in activities that are permissible for financial holding companies under relevant law. To be eligible, institutions also must be established and operating in the U. S. and not controlled by a foreign bank or company.

Applications must be submitted to the applicant's appropriate Federal banking agency, and the guidelines published today state that institutions must consult with their appropriate agency prior to submitting the application. The deadline to apply is 5:00 p.m. (EST) on November 14, 2008. Once an application is filed, the relevant banking agency will review the application and make a recommendation to the Treasury Department for decision.

In a speech this morning, Secretary Paulson made clear that sufficient funds have been allocated to the CCP program ($250 billion) that all applicants who receive approval will be funded. That is, the program is not being offered on a "first come, first serve" basis.

Further information concerning the CCP and other programs currently under development is set out below.

Capital Purchase Program. Secretary Paulson met with chief executives of nine key financial institutions a week ago to request their participation in the CCP. Under the CCP, Treasury plans to invest up to $250 billion of the $750 billion authorized by The Emergency Economic Stabilization Act of 2008 ("EESA")

directly in U. S. financial institutions. The program has been described by Treasury as voluntary, although the Secretary indicated to the executives, some of whom did not want to accept the funds on behalf of their institutions, that they essentially had no choice but to participate.

An initial $125 billion will be invested in the nine institutions (Citigroup, JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon, State Street, and Merrill Lynch) by year end 2008. Treasury intends to make an additional $125 billion available to other institutions, as discussed in today's communications outlined above.

Secretary Paulson said this morning that the purpose of the CCP is "to increase confidence in banks and increase the confidence of banks, so that they will deploy, not hoard, their capital," and that he expects banks to increase lending. However, there is no legal requirement in the program that the banks use the capital to make new loans.

Under the CPP, Treasury will invest an amount equal to not more than 3% of each participating institution's risk-weighted assets or $25 billion, whichever is less, in the institution's senior preferred shares. The shares, which will be non-voting and callable at par after three years, will pay dividends of 5% per year for the first five years of Treasury ownership, increasing to 9% thereafter. The shares may be transferred by Treasury to a third party at any time.

Limits on Executive Compensation. Institutions participating in the CCP must adopt certain standards for executive compensation and corporate governance while Treasury holds their shares. These include ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks; implementing "claw back" provisions for bonus or incentive compensation paid to senior executives based on statements of earnings, gains or other criteria later proving to be materially inaccurate; prohibiting certain golden parachute payments to senior executives; and limiting tax deductions for executive compensation to $500,000 as to each senior executive.

Sale of Troubled Assets by Auction Purchases. Pursuant to EESA, Treasury also continues to develop its program to purchase troubled assets through an auction format. EESA requires guidelines to be issued by the earlier of mid November or within two days after the first such purchase. EESA also contains executive compensation restrictions for institutions selling more than $300 million of troubled assets to Treasury via the program, prohibiting them from entering into new executive employment contracts with golden parachutes, and from deducting executive compensation in excess of $500,000 for senior executives or certain golden parachute payments to its senior executives for tax purposes.

Systemically Significant Failing Institutions. A third program is being developed by Treasury to potentially provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis. Executive compensation standards similar to the CCP executive compensation standards will also apply, but with stricter golden parachute provisions, which would prohibit any payments to departing senior executives.