Financial Stability Plan
By: Multifamily Real Estate Industry Team
On Tuesday, February 10th, United States Treasury Secretary Timothy Geithner and the Federal Reserve Board rolled out the Obama Administration’s plan for spending the second allotment of $350 billion from the Troubled Asset Relief Fund.
Though all of the mechanics are not finalized, the plan expands beyond simply dealing with banks. The “Consumer & Business Lending Initiative” outlined Tuesday (#3 on the “Financial Stability Plan Fact Sheet”) could provide significant relief to businesses and real estate developers who have been unable to borrow money for operations, expansions, or refinancing. As you may recall, in November 2008, the Fed announced the Term Asset-Backed Securities Loan Facility (TALF), whereby the Fed is to purchase loans or loan-backed securities so that funds will be available for loan origination. Previously, Treasury was to use $20 billion to leverage $200 billion from the Federal Reserve. The Consumer & Business Lending Initiative, however, calls for a dramatic increase in TALF by using $100 billion to leverage up to $1 trillion and will expand the initial reach of TALF to include AAA-rated commercial mortgage-backed securities (CMBS).
As to when will TALF be implemented? Federal Reserve Chairman Ben Bernanke has indicated that they are still weeks away from implementing the general TALF program and that the addition of CMBS will not occur until the results of the initial implementation can be reviewed.
And as for whether further expansion of TALF is on the horizon, the Treasury has said that it will continue to consult with the Fed regarding a need to include other asset classes, such as non-Agency residential mortgage-backed securities (RMBS) and assets collateralized by corporate debt.
Secretary Geithner’s full remarks can be found here: http://www.ustreas.gov/press/releases/tg18.htm.
The Federal Reserve Press Release can be found here: http://www.federalreserve.gov/newsevents/press/monetary/20090210b.htm.
(This entry posted by Fritz Vaughan, a member of Womble Carlyle's Government Relations team)
Though all of the mechanics are not finalized, the plan expands beyond simply dealing with banks. The “Consumer & Business Lending Initiative” outlined Tuesday (#3 on the “Financial Stability Plan Fact Sheet”) could provide significant relief to businesses and real estate developers who have been unable to borrow money for operations, expansions, or refinancing. As you may recall, in November 2008, the Fed announced the Term Asset-Backed Securities Loan Facility (TALF), whereby the Fed is to purchase loans or loan-backed securities so that funds will be available for loan origination. Previously, Treasury was to use $20 billion to leverage $200 billion from the Federal Reserve. The Consumer & Business Lending Initiative, however, calls for a dramatic increase in TALF by using $100 billion to leverage up to $1 trillion and will expand the initial reach of TALF to include AAA-rated commercial mortgage-backed securities (CMBS).
As to when will TALF be implemented? Federal Reserve Chairman Ben Bernanke has indicated that they are still weeks away from implementing the general TALF program and that the addition of CMBS will not occur until the results of the initial implementation can be reviewed.
And as for whether further expansion of TALF is on the horizon, the Treasury has said that it will continue to consult with the Fed regarding a need to include other asset classes, such as non-Agency residential mortgage-backed securities (RMBS) and assets collateralized by corporate debt.
Secretary Geithner’s full remarks can be found here: http://www.ustreas.gov/press/releases/tg18.htm.
The Federal Reserve Press Release can be found here: http://www.federalreserve.gov/newsevents/press/monetary/20090210b.htm.
(This entry posted by Fritz Vaughan, a member of Womble Carlyle's Government Relations team)
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