Source: Sisyphus Sign, Fourous - The Week Ahead, 01 Feb 2005. 

Treasury Announces Program for Significant Systemically Failing Institutions Support

Below is my lightly-edited version of the Treasury’s 25 Nov announcement.

The US Treasury Department has released guidelines for participants in its program for SIgnificant SYstemically Failing Institutions Support (SISYFIS).   Financial Institutions will be considered for SISYFIS on a case-by-case basis. 

JUSTIFICATION

SISYFIS provides stability and prevent disruption to financial markets to limit adverse economic impacts and protect American jobs, savings, and retirement assets from the failure of a systemically significant institution. 

The disorderly failure of a systemically significant institution could impose losses on creditors and counterparties, call into question the financial strength of other similarly situated financial institutions, disrupt financial markets, raise borrowing costs for households and businesses, and reduce household wealth. The resulting strains could spread to otherwise financially sound businesses, institutions, or municipalities, and reduce employment, output, and income.

DETERMINATION OF SISYFIS STATUS

In determining whether an institution is systemically significant and at substantial risk of failure, Treasury may consider:

1. If the institution’s failure threatens the viability of creditors and counterparties;
2. If other financial institutions are seen as similar to the failing institution, or would experience indirect contagion effects from the institution’s failure;
3. If the institution is important enough that a disorderly failure would disrupt credit markets or  settlement systems, destabilize  asset prices, significantly increase loss of confidence, and weaken overall economic performance; or
4. The institution’s alternative public or private sources of capital and liquidity.

In making these SISYFIS judgments, Treasury will consider information from a variety of sources, including other regulators, that  provide insight into the consequences if the institution fails.

FORM, TERMS, AND INVESTMENT CONSIDERATIONS

Treasury will determine the form, terms, and conditions of any investment made pursuant to SISYFIS on a case-by-case basis.

Treasury may invest in any financial instrument, including debt, equity, or warrants, that it determines to be a troubled asset, after consultation with the Federal Reserve and notice to Congress. 

Treasury will require any institution participating in SISYFIS to provide Treasury with consideration required to minimize long-term costs and maximize taxpayers’ benefits.

Treasury will also require any SISYFIS-participating institution to limit executive compensation.
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I used to work with numbers for a living, but now I am trying to move ever onward and upward as I look for a job or at least my next idea.  Till next time.

REFERENCES [Accessed 7 Dec 2008]

 
Encyclopedia of Greek Mythology - Sisyphus.
US Treasury -  Guidelines for Systemically Significant Failing Institutions Program,  25 Nov 2008.
Fourous,  The Week Ahead, 01 Feb 2005.