The Federal Reserve has extended a program intended to spur lending to consumers and small businesses, at lower rates. The program, Term Asset Backed Securities Loan Facility or TALF, was scheduled to end this December 31. Now it will carry through March 31 for most types of loans, and through June for others. However, it will not expand the types of loans made.
The TALF started this March in an effort by the Fed to ease credit, stabilize the financial system and help end the recession. Under the program, investors and banks use the TALF money to buy securities backed by auto and student loans, credit cards, business equipment and loans guaranteed by the Small Business Administration. The U.S. Treasury Department announced that the Fed would extend its Term Asset Backed Securities Loan Facility to June 30, for newly issued commercial mortgage backed securities. The Fed and the Treasury extended TALF through March 31 for newly issued asset backed securities, and already issued, or "legacy," commercial mortgage backed securities.
The Fed has been under pressure from industry and lawmakers to shore up the commercial real estate sector, which has been hard hit by the recession. In announcing the extension, the Fed said while financial conditions have improved recently, markets for asset backed securities (ABS) backed by consumer and business loans and for commercial mortgage backed securities (CMBS) are still under strain, and seem likely to remain so for some time. The Fed said authorities had considered expanding TALF to other types of collateral, but decided against it for the moment. However, it also said officials could reconsider that decision if economic or financial conditions warrant.
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