Asset managers for the troubled assets relief program (“TARP”) must be “Financial Institutions.” Under the Act a Financial Institution “is any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands, and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.”
The asset managers will be financial agents of the United States and will have a fiduciary agent/principal relationship with the U.S. Department of Treasury. Treasury will publicly solicit qualifications for two types of asset managers: (i) security asset managers will handle residential or commercial mortgage backed securities (“MBS”) as well as MBS collateralized debt obligations; and (ii) whole loan asset managers will be responsible for residential first mortgages, home equity loans, second liens and/or commercial mortgage loans.
Treasury expects to designate multiple asset managers. In addition, Treasury expects to develop separate criteria for so-called sub-managers which will be smaller, minority- and women-owned Financial Institutions that do not meet the minimum qualifications established for asset managers. Due to the emergency financial situation Treasury is warning that there will be an expedited selection process requiring prompt responses from interested Financial Institutions.
To facilitate the process, Treasury also issued interim guidelines for actual or potential conflicts of interest encountered by asset managers and other contractors working with Treasury under the Act. The interim guidelines focus on organizational conflicts, conflicts created by access to sensitive information, and potential individual conflicts for employees. The interim guidelines require disclosure of these conflicts as well as the development of a conflicts mitigation plan to be submitted with an institution’s initial proposal to Treasury.
Institutions interested in presenting proposals to Treasury should start assessing potential and actual conflicts as well as preparing drafts of mitigation plans.