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Nobody seems to like the concept of a "bad bank", but the idea of a "good bank" has been tossed around. Is the Federal Reserve the beginning of the "good bank" idea? Now that businesses and consumers will have an alternative to the toxic banks, does this pave the way to a bank holiday and the nationalization of toxic banks?
Maybe this is a test of which method will be more successful, with the looser heading to the scrap heap.
Maybe this is a test of which method will be more successful, with the looser heading to the scrap heap.
New lending program targets consumers, business
TALF program finally going into operation on March 25, Fed says
WASHINGTON (MarketWatch) -- A new lending program from the Federal Reserve and the Treasury Department could generate up to $1 trillion in loans to small businesses and consumers, the government announced Tuesday.
The Term Asset-Backed Securities Loan Facility, or TALF, will provide its first loans March 25, the government said. The Fed announced the program in November, then unveiled an expansion last month, but the highly anticipated program was delayed.
Investors who want to participate will apply to the Fed on March 17.
The New York Fed will lend up to $200 billion to owners of high-rated asset-backed securities, such as consumer loans, auto loans, student loans, credit cards or small-business loans. Investors holding these loans will be able to use them as collateral to obtain fresh funding from the government. The Fed's program is designed to make a profit in the long run through interest and fees.
The program is supposed to circumvent credit channels that are now blocked up to stimulate the economy, the government said. With banks unable or unwilling to lend, even the most credit-worthy customers are finding credit hard to obtain.
"The program could represent a turning point for the economy and the financial markets by jump starting lending in critical areas of the economy and by reviving the asset-backed securities market, where issuance has fallen to a crawl from a pace of about $1.5 trillion to $2 trillion in 2005-07," said Tony Crescenzi, chief bond-market strategist for Miller Tabak & Co.
"If it works, a swath of economic data will be impacted, probably by the end of the second quarter or early in the third quarter, altering perceptions about the economy and boosting household, business and investor sentiment," Crescenzi said.
The Fed will conduct monthly fundings through the end of the year if necessary.
A similar program to provide funding for the commercial-paper market has been judged a success, restoring credit flows to larger businesses. The TALF is designed to do the same for consumers and small businesses.
TALF program finally going into operation on March 25, Fed says
WASHINGTON (MarketWatch) -- A new lending program from the Federal Reserve and the Treasury Department could generate up to $1 trillion in loans to small businesses and consumers, the government announced Tuesday.
The Term Asset-Backed Securities Loan Facility, or TALF, will provide its first loans March 25, the government said. The Fed announced the program in November, then unveiled an expansion last month, but the highly anticipated program was delayed.
Investors who want to participate will apply to the Fed on March 17.
The New York Fed will lend up to $200 billion to owners of high-rated asset-backed securities, such as consumer loans, auto loans, student loans, credit cards or small-business loans. Investors holding these loans will be able to use them as collateral to obtain fresh funding from the government. The Fed's program is designed to make a profit in the long run through interest and fees.
The program is supposed to circumvent credit channels that are now blocked up to stimulate the economy, the government said. With banks unable or unwilling to lend, even the most credit-worthy customers are finding credit hard to obtain.
"The program could represent a turning point for the economy and the financial markets by jump starting lending in critical areas of the economy and by reviving the asset-backed securities market, where issuance has fallen to a crawl from a pace of about $1.5 trillion to $2 trillion in 2005-07," said Tony Crescenzi, chief bond-market strategist for Miller Tabak & Co.
"If it works, a swath of economic data will be impacted, probably by the end of the second quarter or early in the third quarter, altering perceptions about the economy and boosting household, business and investor sentiment," Crescenzi said.
The Fed will conduct monthly fundings through the end of the year if necessary.
A similar program to provide funding for the commercial-paper market has been judged a success, restoring credit flows to larger businesses. The TALF is designed to do the same for consumers and small businesses.
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