Lincoln Amendment

Also referred to as the Lincoln Provision (introduced by Sen. Blanche Lincoln), or the “swaps push out” rule. The Lincoln Amendment, which forms part of the DFA, is intended to prevent taxpayers from bearing market participants’ swap-related losses. A controversial and complex provision, it generally prohibits “federal assistance,” such as certain advances from a Federal Reserve credit facility or discount window, to an entity that qualifies as a “swaps entity.” In effect, the amendment requires certain banks to “push out” certain swaps activities to a separately capitalized affiliate or cease the activities altogether, unless an exemption applies. The scope of the push out requirement was limited by Congress in December 2014, when it amended the swaps push out rule so that it only applies to certain swaps based on an asset-backed security or a group or index primarily comprised of asset-backed securities.

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