In an effort to "catalyze the securitization market", the Federal Reserve has announced it will launch the Term Asset Backed Securities Facility (TALF) on March 25.
The program has the potential to spur $1 trillion in lending for businesses and households, which will provide up to $200 billion to investors owning AAA-rated ABS backed securities in a bid to improve the borrowing terms for small businesses, and consumers, according to a press release from the central bank
The operations will be made on a monthly basis and will extend until at least December 2009, after which the program will be reconsidered.
The Fed also said it anticipates that by April the TALF will also cover rental, commercial and government vehicle fleet leases, as well as ABS "backed by small ticket equipment, heavy equipment and agricultural equipment loans."
The Fed is also considering expanding the facility to include a broader range of securities and plans to ask for additional authorities to support the financial system in the United States.
By Erik Kevin Franco and edited by Stephen Huebl
©CEP News Ltd. 2009