TALF to Launch with Updated Terms: Can Wall Street Help Main Street?


On February 6, 2009, the Federal Reserve Board (Federal Reserve) announced updated terms and conditions for the Term Asset-Backed Securities Loan Facility, or TALF, a joint program with the U.S. Treasury Department (Treasury). Updated terms clarify the pricing of TALF loans and refine eligibility requirements for borrowers and the asset-backed securities (ABS) pledged as collateral for TALF loans, including new restrictions on sponsors of eligible ABS.

On February 10, 2009, in coordination with the release of the Treasury’s plan for next phase of the Troubled Assets Relief Program (TARP), the Federal Reserve announced its willingness to increase its TALF commitment from $200 billion to as much as $1 trillion. Treasury also announced expanding the program beyond the asset classes originally designated (credit cards, auto receivables, student loans and small business loans) to include commercial mortgage-related ABS and the Federal Reserve announced consideration of further expansion to include private label residential mortgage-related ABS and assets collateralized by corporate debt. Any expansion of the program would include an increased commitment from the Treasury from its current $20 billion allocation of TARP funds to $100 billion.

The TALF was created to improve lending to consumers and small businesses by providing liquidity to securities backed by consumer and small business loans. Initially announced on November 25, 2008, the first subscription date for TALF loans is expected this month, with a settlement date two weeks thereafter. As discussed below, the final terms, forms and subscription and settlement dates will be published by the Federal Reserve Bank of New York (New York Fed) at www.newyorkfed.org/markets/talf.html.

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