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The Fed's Small Business Aid
By Marc Tracy
Looks like we can look forward to the formal roll-out of the Term Asset-Backed Securities Loan Facility (TALF)--that's the fancy phrase for the $200 billion (at least) that the Federal Reserve is going to use to buy up securities backed by several types of loans, including small-business ones--by the end of the month. The Washington Post reports that the Treasury Department and the Fed today released the final info on TALF, and announced that it will go into effect on March 25. It will start at $200 billion; as we said when reporting on the administration's Small Business and Community Lending Initiative, it could end up going as high as $1 trillion.
This is all to the good (and need not be expensive: remember the Fed isn't giving the money away, so much as buying securities no one else has the capital and/or guts to buy right now; the idea is to sell them eventually and at least break even). But keeping a fairly robust market for the assets backed by certain types of debt is crucial to persuading lenders to continue buying that sort of debt in the first place. And so TALF's purpose is to increase the sorts of loans whose securities it is buying: car, student, credit-card, and--yup!--small-business.
"Already, the expected launch of the program has helped make lenders more inclined to make various consumer loans," the Post reports, "as they have felt comfortable that they could package those loans as securities and, if no market exists for them, pledge them to the TALF in exchange for cash." Here's hoping!
Comments (0)March 3, 2009 5:51 PM
