Archive for November, 2008
Introducing: “TALF”
November 25 – The Federal Reserve Board on Tuesday announced the creation of the Term Asset-Backed Securities Loan 
Facility (TALF), a facility that will help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA).
What is TALF? Term Asset-backed Securities Loan Facility (TALF) is a new lending program created by the Federal Reserve.
What does it do? Under the program, the Fed would offer low-cost loans to any U.S. company investing in securitized loans. The asset-backed securities include pools of credit card receivables, automobile loans, and student loans.
Who can participate? Any U.S. company can participate, including hedge funds but excluding offshore funds.
Why did the Fed do this? There are two main reasons behind the Fed’s decision. First, even with all the money the Fed has been funneling to the banks by buying government securities, it still is not enough to get things moving. Bank balance sheets are still too constrained. Second, banks have frozen most of their lending except for low-risk customers, and even then the rates on these loans are too high.
What is the benefit of the program? Through this program the Fed hopes to get more loans written at lower rates and bring down the cost of borrowing.
Related announcements:
- December 30, 2008 Federal Reserve announces details of program to purchase mortgage-backed securities More info…
- December 19, 2008: Federal Reserve and other central banks announce schedules for term auctions of U.S. dollar liquidity See Full Press Release
- November 25, 2008 Federal Reserve announces it will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises and mortgage-backed securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae More Info…
- November 25, 2008 Federal Reserve announces the creation of the Term Asset-Backed Securities Loan Facility (TALF) More Info…
- FAQs: MBS Purchase Program – http://www.newyorkfed.org/markets/mbs_faq.html
- CNBC Video detailing TALF program:
