The U.S. Federal Reserve set up the Term Asset-Backed Securities Loan Facility (TALF) last March to enable low-interest “student loans, auto loans, credit card loans… and certain other assets.”
TALF sells bundles of loans to investors at low interest rates, which are passed on to the businesses and individuals who took out the loans.
So far, TALF has focused on those “other assets.” The Fed’s 13 July list of bundled loans showed a few bundles based on small-business loans and one that put together a package of student loans.
But most of TALF’s $252 million to date had been invested in bundles of commercial real estate mortgages, most issued by JPMorgan Chase and Citigroup, with some dating back to 2013.
TALF’s purpose, the Fed stated, is to “help meet the credit needs of consumers and businesses by facilitating the issuance of asset-backed securities.”
“It’s pretty tough to find a connection between the consumer and commercial real estate mortgages on hotels, shopping malls and office buildings,” noted Pam Martens and Russ Martens in Wall Street on Parade. They added, “Saving old investments that have already been issued does nothing to help new issuance, unless one considers the Fed distorting the market to be a help.”
More than $82 million of TALF money has made its way to BlackRock, the world’s largest asset management company, which used the loan to buy four packages of commercial mortgages.
PUBLISHER’S NOTE: The current program is TALF II. The original TALF bailed out Wall Street banks from 2007 through 2010 during the Great Recession. Despite the Fed’s statement to the contrary, the program’s new incarnation seems to have kept the same mission as the original: to bail out the “too big to fail” big banks while individuals and small businesses are left to fend for themselves.
