WASHINGTON Treasury Secretary Henry Paulson on Monday outlined the process for banks and thrifts to request capital from the government.
In a brief press conference, Paulson emphasized that all banks may apply, and that the $125 billion program is not being implemented on a first-come-first-served basis.
Sufficient capital has been allocated so that all qualifying banks can participate, he said.
Paulson said regulators have created a single form that any interested bank or thrift may submit to their primary federal regulator by Nov. 14.
Once the regulator reviews an application, it will send it along with its recommendation to the Office of Financial Stability at the Treasury Department.
Once Treasury receives the application with the regulators recommendation, we will review it and decide whether or not to make the capital purchase, Paulson said. Treasury welcomes the expertise of the financial regulators, and will give considerable weight to their recommendations.
All approved transactions will be announced to the public within 48 hours of execution. Paulson said Treasury will not announce any applications that are withdrawn or denied.
This efficient process, with standardized forms and standardized review, will encourage banks and thrifts of all sizes to participate in the program, he said. By so doing, they will increase their capital base so that they can provide the lending necessary to support the U.S. economy as we work through this difficult period.
Nine of the largest banks have already agreed to accept $125 billion in funds from Treasury in return for equity stakes.
In a joint statement on Monday, federal bank regulators encouraged all eligible institutions to use Treasurys capital purchase program and a separate program from the Federal Deposit Insurance Corp. that would temporarily back bank debt.
Federal regulators said eligible institutions will be able to sell equity interests to Treasury in amounts equal to 1% to 3% of an institutions risk-weighted assets. These interests will constitute Tier 1 capital for banks and thrifts, regulators said.