The Fed announced this morning a new attempt to jump start the asset-backed securities (ABS) market. FRB: Press Release--Federal Reserve announces the creation of the Term Asset-Backed Securities Loan Facility (TALF)--November 25, 2008:
The Federal Reserve Board on Tuesday announced the creation of the Term Asset-Backed Securities Loan Facility (TALF), a facility that will help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA).
Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. The U.S. Treasury Department--under the Troubled Assets Relief Program (TARP) of the Emergency Economic Stabilization Act of 2008--will provide $20 billion of credit protection to the FRBNY in connection with the TALF. The attached terms and conditions document describes the basic terms and operational details of the facility. The terms and conditions are subject to change based on discussions with market participants in the coming weeks.
TALF Terms and conditions
It looks like the Fed and the Treasury are trying to go to the root of the issue by supporting old fashioned straight-up ABS deals. As the Fed press release noted, the ABS market came to a complete halt in October.
This is good news for intangible asset monetization. Intangible asset deal have tended to be the straight-up type. Getting the fundamental ABS market restarted opens the door to future intangible-backed deals. In addition, as the terms and conditions description points out:
The set of permissible underlying credit exposures of eligible ABS may be expanded later to include commercial mortgage-backed securities, non-Agency residential mortgage backed securities, or other asset classes.Could "other asset classes" include intangibles? Maybe, just maybe.
Fed spending $100B to buy loans isn't much different than if the government spent $100B to buy SUVs off the dealer lots. These investments are not helping America, and its companies, become more competitive. We need to focus our assistance on moving forward with new business models that enhance competitiveness so companies can succeed in global markets. Read more at http://www.ThePhoenixPrinciple.com