What is TALF? Term Asset-backed Securities Loan Facility (TALF) is a new $200 billion dollar 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.
The Fed has now created a new role for itself, that of loan broker, a new and heretofore untried strategy.
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Reader Comments (Page 1 of 1)
12-21-2008 @ 1:45PM
Andre Haeff said...
What effect will this 200 bn of Fed TALF program
funds have ,not only on Hedge Funds, but on
Private Equity enterprises in general?
Andre Haeff 12/21/08
12-22-2008 @ 2:25AM
bill said...
another government agency wearing blindfolds throwing money away that u and i will have to pay for. very simple isn't it.
12-21-2008 @ 8:13PM
lou said...
What the heck? Billions given to these banks and they still haven't received enough freebies yet? How stupid are the top executives and CEOs at these bailed out banks that they didn't realize they were over-extending their lending abilities? Or should I say how smart? Maybe they knew a bailout was coming. Fire them all.
12-22-2008 @ 11:38AM
T. Holmes said...
Amazing. The Fed now hopes that it can put enough sugar on these items to entice companies to buy in.
I have one question: Who is backing these buyers if this latest plan fails and they are stuck with more "toxic assets"? Will the Fed(taxpayer) then buy them back?
These stories scare me because they are so reminiscient of the 1930's when the "brain-trust" ran out of ideas. Have we reached that point? The smart ones are all hoarding cash like there's no tomorrow--fitting, because there isn't one, at this point.
12-22-2008 @ 1:20PM
Iridium said...
Great so hedge funds can now borrow taxpayer money to drive up commodity prices.
Oh fantastic. Just what I would expect from a former Goldman CEO.