Treasury Secretary Henry Paulson filled in some of the blanks about his department’s Capital Purchase Program (CPP) during an October 20 press conference. The program has become the central focus of the government’s effort to restore liquidity and stability to the financial system under the Troubled Asset Relief Program (TARP).

Although Treasury has allotted $250 billion for the Capital Purchase Program, Paulson emphasized that this figure should not be considered the program’s price tag for taxpayers. “This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything,” he said.

Paulson also made clear that the government is looking for broad participation by healthy institutions. “While many banks have suffered significant losses during this period of market turmoil, many others have plenty of capital to get through this period, but are not positioned to lend as widely as is necessary to support our economy,” Paulson said.

He pointed out that sufficient capital has been allocated so that all qualifying banks can participate. Paulson underscored that the terms for the program are the same for all institutions that apply before the capital purchase program deadline of Nov. 14. Treasury has already received indications of interest from a broad group of banks of all sizes, he added.

The Treasury Secretary emphasized that the government will expect participating banks to increase lending. “Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital.”

Paulson unveiled a single application form that “qualified and interested publicly-held financial institutions” will use to submit to their primary regulator. To apply, banks should review the program information on the Treasury website, consult with their primary federal regulator, and then submit an application to the regulator.

All regulators will use a standardized process to review applications to ensure consistency. Once a regulator has reviewed an application, it will send the application along with its recommendation to the Office of Financial Stability at the Treasury Department. Treasury will then review the application and decide whether to make the capital purchase. All transactions will be publicly announced within 48 hours of execution. However, Treasury will not announce any applications that are withdrawn or denied.