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ICBA Statement on Interagency Guidance on Fannie, Freddie Losses

Washington, D.C. (Oct. 17, 2008)—Camden R. Fine, president and CEO of the Independent Community Bankers of America (ICBA), issued the following statement on the interagency announcement that implements fair tax treatment for losses on Fannie Mae and Freddie Mac preferred shares following the federal takeover of the mortgage-finance firms. Banks may recognize the effect of the tax change enacted in Section 301 of the Emergency Economic Stabilization Act of 2008 (EESA) in their third quarter 2008 regulatory capital calculations.

“ICBA has been the leader in pressing federal banking regulators to ensure the financial health of community banks is not jeopardized due to the conservatorship of Fannie Mae and Freddie Mac.

“ICBA’s proposal to treat losses on the mortgage firms’ preferred stock as ordinary losses, which was included in EESA, is critical in ensuring the community banks that held GSE preferred stock can continue providing much-needed services to Main Street America. The bank agencies’ guidance that banks may recognize the benefits of that tax treatment in calculating regulatory capital for the third quarter will help ensure that the true financial condition of these institutions is not misstated even though the tax change was adopted by Congress in the fourth quarter.

“Our nation’s nearly 8,500 community banks are strong, common-sense lenders that did not engage in the practices that have led to our current economic crisis. Community banks are well-capitalized and stable and are eager to do what is necessary to restore vitality to our economy. This guidance, as well as assistance from the Troubled Asset Relief Program for community banks that suffered the most serious impact from preferred share losses—for which ICBA was a vigorous and vocal advocate—will help community banks return economic stability to our country and our communities.

“ICBA thanks the Federal Deposit Insurance Corporation, Federal Reserve, Office of the Comptroller of the Currency and Office of Thrift Supervision for their prompt attention and hard work on this critical issue.”

For more information, view the guidance or visit www.icba.org.