What Is Term Asset-Backed S⛄ecurities Loan Facility (TALF)?

Term Asset-Backed Securities Loan Facility (TALF) was a program created by the U.S. Federal Reserve in Nov. 2008 to boost consumer spending in order to help jumpstart the economy. It did this by issuing loans to banks using asset-backed securities (ABS) as collateral. The collateral for these securities was made up of auto loans, student loans, credit card loans, equipment loans, 澳洲幸运5官方开奖结果体彩网:floor plan loans, insurance premium finance loans, loans guaranteed by the 澳洲幸运5官方开奖结果体𝓡彩网:Small Business Administration (SBA), residential mortgage servicing advances, or commercial mortgage loans. This increased banks' liquidity as they issued more credit to consumers and small businesses, which increased economic activity. The backing for these loans came from funds provided by the Federal Reserve Bank of New York. A new version of the program was started in 2020 to purchase ABS during the economic disruption of the global crisis.

On Nov. 19, 2020, Treasury Secretary Steven Mnuchin said he would not reauthorize extending TALF 2020 past Dec. 31, 2020. The program stopped making new loans as of Dec. 31, 2020.

TALF 2020

The Federal Reserve restarted the program in 2020 during the coronavirus crisis. The revived TALF program was a 澳洲幸运5官方开奖结果体彩网:special purpose vehicle (SPV) that the Fed lent money to. This SPV initially made up to $100 billion in loans on a 澳洲幸运5官方开奖结果体彩网:non-recourse basis, with a maturity of three years. It stopped making loans as of Dec. 31, 2020. The Treasury department gave $10 billion to the TALF program to cover loan losses.

To be eligible to get loans from the facility, a business needed to be "created or organized in the United States or under the laws of the United States, have significant operations in and a majority of their employees based in the United States, and maintain an account relationship with a 澳洲幸运5官方开奖结果体彩网:primary dealer."

To 𝔍be be used as collateral, an ABS had to meet the following q෴ualifications:

• It needed to be U.S. dollar-denominated.
• It could not be 澳洲幸运5官方开奖结果体彩网:synthetic.
• It had to have the highest long-term 澳洲幸运5官方开奖结果体彩网:investment grade credit ratings from at least two eligible nationally recognized statistical rating ಞorganizations (NRSROs). If there were no long-term ratings available, two NRSRO ratings of the highest short-term investment-grade ratings, and no NRSRO ratings below that grade, were also acceptable.
• All (or substantially all) of its underlying credit (except for CMBS) must have been newly issued.
• It must have been issued on or after March 23, 2020, with three exceptions. Eligible 澳洲幸运5官꧂方开奖结果体彩网:commercial mortgage‐backed securi♔ties (CMBS) must have been issued before March 23, 2020, and eligible SBA Pool Certificates and Development Company Participation Certificates (types of securitized small business loans) must have been issued on or after Jan. 1, 2019.
• Its underlying credit exposure was required to be one of the following: auto loans and leases, student loans, credit card receivables (both consumer and corporate), equipment loans and leases, floor plan loans, premium finance loans for property and casualty insurance, certain small business loans that were guaranteed by the 澳洲幸运5官方开奖结果体彩网:Small Busine🎀ss Administration (SBA), 澳洲幸运5官方开奖结果体彩网:leveraged loans, or commercial mortgages.

All collateral was valued using various haircuts established in 2008, and borrowers were assessed an administrative fee equal to 10 basis points on the loan amount.

TALF 2008

TALF was a funding facility that helped market participants meet the credit needs of households and small businesses by supporting the issuance of ABS collateralized by loans of various types to consumers and businesses of all sizes, according to the Federal Reserve.

Under the TALF, the Federal Reserve Bank of New York (FRBNY) lent up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY extended loans in an amount equal to the market value of the ABS, less a retained percentage known as a haircut, and these loans were secured at all times by the ABS.

The U.S. Treasury Department under the Troubled Asset Relief Program (TARP) of the 澳洲幸运5官方开奖结果体彩网:ܫEmergency Economic Stabilizati❀on Act of 2008 provided $20 billion of credit protection to the FRBNY in connection with the TALF. The TALF began operation in March 2009 and was closed for new loan extensions on June 30, 2010. The final outstanding TALF loan was repaid in full in Oct. 2014.

TALF's Success

Over the life of the program, all TALF loans were repaid in full at or before their respective maturity dates. The New York Fed did not incur a loss on any TALF loan, according to the Fed. As all TALF loans were repaid in full, no TALF collate♍ral was surrendered 𝕴to the New York Fed, and TALF LLC acquired no such assets during its existence.

The Treasury received 90% of the monthly distributions and the New York Fed received 10%. In the aggregate, TALF LLC paid a total of $745.7 million in such distributions to the Treasury and New York Fed, the Fed reported.

TALF was one of a number of government pro♐grams to help stabilize the economy and unfreeze credit during the financial crisis. Economists generally agree that the measures taken achieved their intended purpose without massive losses to the Treasury.