Term Asset-Backed Securities Loan Facility ("TALF")

The Term Asset-Backed Securities Loan Facility (TALF) was created in early 2009 to kick-start the markets in asset-backed securities offering non-recourse loans to investors holding new asset-backed securities, generally student loans, auto loans, floorplan loans, credit card loans, insurance premium loans, Small Business Administration loans. It was then expanded to include legacy (“toxic”) and new commercial mortgage-backed securities. In theory, this would encourage consumer and commercial lending in these areas by creating a market for those loans to be repackaged as ABS and sold to investors. The loans are made by the Federal Reserve Bank of New York, with funds from the Treasury to service the liquidation of assets seized by the Fed should a borrower default on or walk way from their loan (though this has yet to occur). The program was initially funded by $200 billion in lending from the Federal Reserve with $20 billion reserved from the Treasury for liquidation, but the Fed has said the program is expandable to $1 trillion and up to $80 billion in Treasury funding. Treasury also announced that they are upping the current commitment to $30 billion should the Fed need it. The program has been expanded and lengthened, but is currently set to expire by June 2010.

At the conclusion of the lending period in June 2010, the last TALF purchase was made in March 2010.

Funding agency and aid type
The funding agency was the Treasury Department.

Loans to holders of legacy CMBS and new commercial and consumer lending ABS.

The New York Federal Reserve stopped purchasing asset-backed securities under TALF on June 30, 2010. On July 20, 2010, the NY Fed announced that it had reached an agreement with Treasury to reduce the credit protection offered by Treasury under TARP from $20 billion to $4.3 billion. The NY Fed said that no losses had occurred thus far and that it anticipated that interest payments it earned under TALF would cover any future losses.

Who benefits
Directly: Holders of legacy CMBS and packagers of new ABS.

Related SourceWatch articles

 * SIGTARP Quarterly Report to Congress July 21, 2009
 * Troubled Asset Relief Program