The Federal Reserve announced on Aug 17th it would extend the emergency rescue loan program, Term Asset-Backed Securities Loan Facility (TALF) with capacity of up to $1 trillion, by another 3 to 6 months. The Fed and Treasury justify this extension of the program deadlines by saying the ABS and CMBS markets “are still impaired and seem likely to remain so for some time.” There is a definition and breakdown of the purpose and effects this TALF program has on the markets in an earlier article.
There are two parts to TALF. One provides loans for market participants to purchase newly issued commercial mortgage-backed securities (CMBS) and the other provides loans for other asset-backed securities (ABS) and CMBS issued before Jan 1st 2009. The portion of the program covering newly issued CMBS was extended from Dec 31st to June 30th while the portion covering other ABS and older CMBS was extended from Dec 31st to March 31st.
The Fed originally started TALF with a capacity of $200 billion and was backed by $20 billion from Treasury’s Troubled Asset Relief Program (TARP). They later announced it could expand to a capacity of $1 trillion. The commercial real-estate industry and 41 House members including Barney Frank have requested the Fed extends the program deadline until December 2010.
Even though the capital markets are improving and recovery is slowly bur surely taking place, the Federal Reserve is going to continue helping consumer lenders with tax and printed money. The Federal Reserve has now extended the TALF program which will continue providing cheap government financing to investors until the Fed decides otherwise.
Bloomberg – Fed Extends TALF Program for Commercial Real Estate