The Term Asset-Backed Securities Loan Facility: The U.S. Government ABS Party’s Slow Start

Abstract

The Term Asset-Backed Securities Loan Facility (TALF) is a program of the Federal Reserve Bank of New York (FRBNY) under which it provides relatively short-term non-recourse loans to finance investor purchases of principally newly issued AAA-rated Asset Backed Securities (ABS). This article describes some of the key reasons for lower-than-expected early participation. The article also discusses the basics of the TALF structure and offers views on its potential impact on the ABS marketplace. Finally, the authors encourage the FRBNY to continue TALF beyond the end of 2009 so as to allow the program—for which they see widespread but still cautious enthusiasm—the opportunity to realize its potential.

TOPICS: Asset-backed securities (ABS), CMBS and commercial mortgage loans