This case examines the interplay of financial reporting, tax and regulatory motivations in a firm's decision to issue securities. The context for the case is a bank's decision whether to issue debt or trust preferred securities (TPS). Currently, TPS are changing the landscape of corporate balance sheets with an increasing number of companies reporting securities in the “mezzanine” section of the balance sheet (between equity and debt). Referred to by many as the “Holy Grail” of financial instruments, TPS appear to be the first securities to be treated as debt for tax purposes, but not for financial reporting or debt‐rating purposes. Since their introduction in late 1993, they have quickly become the primary variant of new preferred stock issues, representing 60 percent of all new issues of preferred stock.