Term Asset-Backed Securities Loan Facility (TALF)

From MarketsWiki
Jump to: navigation, search
RJO-logo.gif

The Term Asset-Backed-Securities Loan Facility is the U.S. Federal Reserve's consumer-lending facility. The TALF was set up in November 2008 to spur the consumer-loan market by having the Fed lend up to $200 billion in public funds to investors who buy securities backed by car loans, credit card debt, student loans and small business debt. It is intended to jump-start the lending markets for education, autos, small businesses and credit cards.[1]

Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS.

The U.S. Treasury Department, under the Troubled Assets Relief Program (TARP), will provide $20 billion of credit protection to the FRBNY in connection with the TALF.[2]

The Obama administration has discussed expanding the TALF to provide financing for other older assets, such as mortgage-backed securities.[3]

References

  1. Financial Rescue Turns to Toxic Assets. The Washington Post.
  2. Press Release. The Federal Reserve.
  3. Bailout Talks Turn to More Equity Stakes. The Wall Street Journal.