The Federal Reserve Board and Treasury Launch the Term Asset-Backed Securities Loan Facility (TALF)
March 5, 2009
On March 3, 2009, the U.S. Department of the Treasury (Treasury) and the Board of Governors of the Federal Reserve System (FRB) released the terms for the first two fundings of the Term Asset-Backed Securities Loan Facility (TALF). The first monthly TALF funding will take place in March 2009. TALF will be operated through the Federal Reserve Bank of New York (FRBNY) and was created to stimulate the consumer lending portion of the securitization market, which had been stifled since September 2008. In describing the purpose of TALF, the FRBNY has said that TALF is designed to help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities (ABS) that are collateralized by student loans, auto loans, credit card loans and loans guaranteed by the U.S. Small Business Administration (SBA). Treasury and the FRB reserved the right to adjust the terms and conditions, including the eligible collateral and haircuts. They are currently analyzing the appropriate terms for accepting commercial mortgage-backed securities and are evaluating other types of AAA-rated newly issued ABS for acceptance under the program. The two primary modifications to the TALF terms and conditions announced on March 3, 2009, are a reduction of funding rates and the removal of the TARP executive compensation limitations.
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