Client Alert

Because of the rapidly changing conditions in the financial markets, we have established this special series of Client Alerts to advise you of the newest economic and legal developments and their wide-ranging business implications.

The historic "economic rescue" bill began as a 2.5 page proposal from the U.S. Treasury to provide immediate liquidity to troubled financial markets and grew to a nearly 450-page enactment consisting of three separate laws: (i) the Emergency Economic Stabilization Act of 2008 (“EESA”), (ii) the Energy Improvement and Extension Act of 2008, and (iii) the Tax Extenders and Alternative Minimum Tax Relief Act of 2008. President Bush signed the bill yesterday within moments of its passage in the House of Representatives. Whether Congress made immediate implementation of the “rescue” provisions of the bill unwieldy remains to be seen.

In the course of this week, the Senate assumed leadership for the passage of a "rescue" bill after the financial markets swooned on the news that the House did not pass the initial bill. The Senate added a comprehensive tax bill and provisions expanding basic FDIC insurance coverage to $250,000 to the failed rescue bill and on Wednesday October 1 passed the broader rescue/tax package. The tax package includes a one-year patch for the Alternative Minimum Tax (AMT), extensions of expiring tax relief for businesses, energy tax credits and provisions ensuring that mental health benefits are on par with medical and surgical benefits. The change in heart of members of the House who had opposed the rescue bill on Monday may be attributed to a number of factors, including the addition of tax relief, expansion of FDIC coverage, mental health parity and evidence that the current economic crisis could get much worse without urgent Congressional action.

The focus of this summary is on EESA. EESA is expected immediately to affect the outlook of banks and their investment bank affiliates and other financial services providers. The impact of EESA, however, is not limited to financial institutions desiring to sell assets, as the new law creates significant opportunities for service providers, contractors and investors interested in assets that will be available for purchase at the “back end” of the process. Even though much of the implementation of the EESA provisions is left to the Treasury Department, in our flagging economy there will be great pressure on Treasury to make the EESA programs operational just as soon as possible. It is likely, for example, that certain liquidity-enhancing asset sales could take place very soon, even before Treasury establishes final guidelines or rules.

To read the full summary, please click here.

If you have any questions about this or another financial services matter, please contact a member of the Capital Markets Practice Group at Womble Carlyle Sandridge & Rice. Readers are urged to consult with their regular contacts at Womble Carlyle or Donald Lampe at 704-350-6398.

* Prepared by Donald C. Lampe. This is based on a summary dated September 29, 2008, covering an earlier version of the bill (HR 3997). This summary is not intended to be, nor should it be relied on as, legal advice or counsel. Any person or entity affected by the legislation should consult with counsel before making decisions or taking actions based on this comprehensive and unprecedented legislation.