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March 3rd, 2009

TALF: The Relief Main St. Has Been Waiting For?



As a component of Treasury Secretary Geithner’s Financial Stability Plan, the Federal Reserve and the Treasury Department launched the Term Asset-Backed Securities Loan Facility (TALF) today. Beginning on March 25, the program will create a new lending facility for up to $1 trillion in “auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.”

“The TALF is designed to catalyze the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities (ABS).  These markets have historically been a critical component of lending in our financial system, but they have been virtually shuttered since the worsening of the financial crisis in October.  By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy,” said the Federal Reserve and the Treasury Department in a joint press release today.

We first wrote about the TALF last November, touting it as the long-awaited relief for Main Street. In addition to its ability to impact main street, the program is also designed to influence businesses as well. Yet, at least one company questions whether or not this program can meaningfully impact failing businesses which may need it the most:

At least one company, GMAC — which has received $5 billion in government aid through the Troubled Asset Relief Program — has suggested the TALF’s impact may be muted because of ratings requirements on securities. For GMAC, which provides financing for General Motors vehicles, “rating agencies are not willing to provide the required rating level while GM’s situation remains unresolved,” GM said in a report to Treasury last month.

Some market observers have noted that if the program works, we’re likely to see results by the second to third quarter of this year.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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