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PH FedACTion: Financial Regulatory Updates

Daily Financial Regulation Update - Wednesday, April 22, 2020

April 22, 2020

FedACTion Task Force

to read more from our Coronavirus series.

Major Developments

U.S. Senate

Paycheck Protection Program Increase Act of 2020

April 21, 2020

The United States Senate approved the Paycheck Protect Program Increase Act of 2020 (the Increase Act) increasing appropriations for (i) the Paycheck Protection Program (PPP) from $349 billion to $659 billion; and (ii) the Emergency Economic Injury Disaster Grants from $10 billion to $20 billion. The Increase Act also expanded the PPP to agricultural enterprises, and created set asides to insure that smaller banks and credit unions can participate in the PPP. The Increase Act remains pending in the House of Representatives.


to view the full text of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), 116 HR. 748, Enacted March 27, 2020.

to view the full text of the Paycheck Protection Program Increase Act of 2020, adopted by the U.S. Senate April 21, 2020

from the Senate Committee on Banking, Housing, and Urban Affairs, Senate Committee on Small Business and Entrepreneurship, House Committee on Financial Services, and House Committee on Small Business.

U.S. Senate

Committee on Small Business and Entrepreneurship

Small Business Committee Will Use Subpoena Power to Review Paycheck Protection Program Compliance

April 20, 2020

U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, announced his Committee would conduct aggressive oversight of the Paycheck Protection Program (PPP), including whether companies made false certifications to the federal government to receive PPP loans. Senator Rubio confirmed the Committee will use its subpoena power to compel cooperation from companies that are not forthcoming.

Federal Agencies

Department of the Treasury

Treasury Finalizes Agreements with Major Airlines, Disburses Initial Payroll Support Program Payments

April 20, 2020

The U.S. Department of the Treasury (Treasury) finalized Payroll Support Program agreements with Allegiant Air, American Airlines, Delta Air Lines, Southwest Airlines, Spirit Airlines, and United Airlines. Alaska Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, and SkyWest Airlines have also indicated that they plan to participate in the program. Treasury also made an initial $2.9 billion of Payroll Support Program payments to passenger air carriers, including two major airlines and 54 smaller passenger air carriers. Additional payments will be made to approved applicants on a rolling basis. All funds provided under the program can be used only for the continuation of payment of employee wages, salaries, and benefits.

Federal Reserve Bank of New York

New York Fed Releases Collateral Schedule and Updated Frequently Asked Questions for the Primary Dealer Credit Facility

April 20, 2020

The Federal Reserve Bank of New York has released the collateral schedule and updated the Frequently Asked Questions (FAQs) for the Primary Dealer Credit Facility (PDCF). The PDCF is a loan facility that will provide credit to primary dealers in exchange for a broad range of collateral for term funding with maturities up to 90 days. The updated guidance indicates that a firm cannot pledge its own obligations to the PDCF as collateral.

Securities and Exchange Commission

SEC Provides for Phased CAT Broker-Dealer Reporting Timelines with Conditional Exemption for Impacts of COVID-19

April 20, 2020

The Securities and Exchange Commission announced that, in light of the impacts of the COVID-19 pandemic, it has voted to issue two exemptive orders in order to move Consolidated Audit Trail (CAT) implementation forward: (1) establishing a phased CAT reporting timeline for broker-dealers, and (2) permitting introducing brokers that meet certain requirements to follow the small broker-dealer reporting timeline.

Federal Housing Finance Agency

FHFA Addresses Servicer Liquidity Concerns, Announces Four Month Advance Obligation Limit for Loans in Forbearance

April 21, 2020

The Federal Housing Finance Agency (FHFA) announced the alignment of Fannie Mae’s and Freddie Mac’s (collectively, the GSEs) policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. Once a servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. This applies to all GSE servicers regardless of type or size.

Department of Education

Secretary DeVos Delivers $6 Billion in Additional Grant Funding to Support Continued Education at America's Colleges, Universities

April 21, 2020

U.S. Secretary of Education Betsy DeVos announced an additional $6.2 billion is now available to higher education institutions to ensure learning continues. The funding is available through the Higher Education Emergency Relief Fund authorized by the CARES Act. The CARES Act allows institutions to use up to one-half of the total funds received to cover any costs associated with significant changes to the delivery of instruction due to COVID-19. The funding for these "Recipient Institutional Costs" is separate from the funding previously made available for "Emergency Financial Aid Grants to Students." In order to access the funds, higher education institutions must submit a Certification and Agreement for Recipient Institutional Costs.

Loan Syndications & Trading Association

LSTA Releases Comment Letter on Main Street Loan Programs

April 21, 2020

The Loan Syndications & Trading Association (LSTA) submitted a comment letter in connection with the Federal Reserve’s Main Street Lending Programs (MSLP). While supporting the MSLP, the LSTA notes, however, that in order for the MSLP to achieve its goal, it is essential that the MSLP reflect current market standards and circumstances so that the program will be accessible as a practical matter to as many of the intended recipients as possible. Specifically, the LSTA recommends:

  1. incorporating more flexible terms to recognize that most eligible borrowers are constrained by existing debt agreements that often include terms prohibiting the incurrence of additional debt and/or liens, subject to certain exceptions;

  2. reconsidering requiring all borrowers to comply with an EBITDA-based leverage test which may exclude many otherwise qualifying borrowers from the MSLP by allowing borrowers and lenders to agree upon appropriate metrics;

  3. giving lenders more discretion to determine appropriate terms and conditions for MSLP loans, recognizing that lenders will retain exposure to these loans;

  4. broadening the base of eligible lenders to include foreign banks and their U.S. branches and non-bank lenders either directly or as part of a syndicate with other eligible lenders;

  5. broadening the base of eligible borrowers by allowing borrowers that do not currently have term loans, such as companies with only a revolving credit facility, to borrow under the MSLP; and

  6. making changes to other terms and conditions, including the maximum loan size calculation test, attestations and certifications, and the mandatory use of the Standard Overnight Financing Rate, or SOFR, for all loans made under the MSLP.

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