August 19, 2009
The U.S. Federal Reserve and the Treasury Department announced Monday that they approved an extension of the Term Asset-Backed Securities Loan Facility (TALF). At this time, they did not anticipate any further additions to the types of collateral that are eligible for the facility.
"Conditions in financial markets have improved considerably in recent months," the Fed said in a statement. "Nonetheless, the markets for asset-backed securities (ABS) backed by consumer and business loans and for commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time."
The statement said that to promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Fed and Treasury have approved extending TALF loans against newly issued ABS and legacy CMBS through March 31, 2010.
Because new CMBS deals can take a significant amount of time to arrange, the Fed and Treasury approved TALF lending against newly issued CMBS through June 30, 2010.
The Fed and Treasury had previously authorized TALF loans through Dec. 31, 2009.
The Fed and Treasury added they are holding in abeyance any further expansion of the types of collateral eligible for TALF. The securities already eligible for collateralizing TALF loans include the major types of newly issued, triple-A-rated ABS backed by loans to consumers and businesses, and newly issued and legacy triple-A-rated CMBS.
Last week, the Fed delivered a vote of confidence in the economy, saying the downturn appeared to be "leveling out." Fed officials also said they would slow the pace of a program to buy 300 billion U.S. dollars worth of Treasury securities, an effort aimed at keeping mortgage rates affordable. The central bank said it planned to shut down the program at the end of October.