Term Asset-Backed Securities Loan Facility

Securitization is dead A new program from U.S. Treasury Secretary Geithner and the central bank is now reviving the market. The criticism rating agencies are already rub their hands.
“Term Asset-Backed Securities Loan Facility (Talf) is the bulky name. But on the American Treasury and the Fed dreamed up Wortungetüm rest the hopes of the market participants: Talf should not be less successful than the resuscitation of the securitization market: “It remains to be seen whether Talf medicine will be the market jumps on the help” , write the experts of the Research House Credit Sights.

In Talf is a loan program with a volume of $ 200 billion for securities with auto loans, credit card debt and student loans are collateralized. It is a total credit in the amount of $ 1000 billion set free – and the liquidity in the dried securitization market.

The beginning was modest, however: On Thursday evening, the New York Fed that, in a first tranche of 25 March total of $ 4.7 billion to be disbursed. $ 1.9 billion of which were for auto loans, $ 2.8 billion for credit card debt collateralized securities determined. Citigroup, Ford, Nissan and Huntington National Bank participated. “This is a good start on which we can build,” said William Dudley, president of the New York Fed. More money goes on 14 April.

Possible core of the Bad Bank
May also be manageable debut: market participants continued to the fact that Finance Minister Timothy Geithner and Federal Reserve Talf the program gradually expanded – and new debt securities to include. So far, only the best credit quality assets accepted as collateral. However, initial statements suggest that the future will be different. “The collateral for the Talf program will probably be extended to other assets expanded,” it says in the evening on Wednesday published opinion from the Fed.

Some experts see Talf in the core of a Bad Bank. They consider it possible that Geithner his concept of private funds, which buy up problem securities, which could merge Talf. The basic idea: The government could, under this program also illiquid assets accepted as collateral – and thus de facto money houses and hedge funds, the rotten paper off. “This would allow the government, the Bad Bank approach quickly up. Finally, many technical issues already resolved,” says Zach Pandl, an economist at Nomura Securities.

Windfall for the rating agencies?

Urgent action is required: investors shy before purchase securities secured, resulting in high risk premiums too. With credit card debt best credit backed securities are currently 320 basis points above the London Interbank rate Libor traded. They must thus be 3.2 percentage points higher interest rates than the banks when they lend money among themselves. In mid-February, the difference was still at 250 basis points situated. For loans secured with car loans, the premium, according to JP Morgan Chase even 350 basis points.

The Talf start had already been repeatedly postponed. Originally, in February with the start lending. In March, the new date then again two days rearwards relocated. Not only because of the delay, some experts criticize the program.

They also complain that the hotly of oltenen Ratinagenturen a crucial role. Because Talf All papers must be approved by the standing guards to be evaluated. According to the Wall Street Journal could be the place for deer, such as Standard & Poor’s (S & P) and Moody’s, a money blessing from 80 to 240 million dollars mean. S & P and Moody’s are accused of structured products to well-rated and thus fueled the crisis to have.

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