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Federal Reserve TALF Program Extended

joey — Tue, 18 Aug 2009 15:54:38 +0000

The Federal Reserve announced on Aug 17th it would extend the emergency rescue loan program, Term Asset-Backed Securities Loan Facility (TALF) with capacity of up to $1 trillion, by another 3 to 6 months. The Fed and Treasury justify this extension of the program deadlines by saying the ABS and CMBS markets “are still impaired and seem likely to remain so for some time.” There is a definition and breakdown of the purpose and effects this TALF program has on the markets in an earlier article.

There are two parts to TALF. One provides loans for market participants to purchase newly issued commercial mortgage-backed securities (CMBS) and the other provides loans for other asset-backed securities (ABS) and CMBS issued before Jan 1^st 2009. The portion of the program covering newly issued CMBS was extended from Dec 31^st to June 30^th while the portion covering other ABS and older CMBS was extended from Dec 31^st to March 31^st.

The Fed originally started TALF with a capacity of $200 billion and was backed by $20 billion from Treasury’s Troubled Asset Relief Program (TARP). They later announced it could expand to a capacity of $1 trillion. The commercial real-estate industry and 41 House members including Barney Frank have requested the Fed extends the program deadline until December 2010.

Even though the capital markets are improving and recovery is slowly bur surely taking place, the Federal Reserve is going to continue helping consumer lenders with tax and printed money. The Federal Reserve has now extended the TALF program which will continue providing cheap government financing to investors until the Fed decides otherwise.

Bloomberg – Fed Extends TALF Program for Commercial Real Estate: http://joeyconway.com/978hsh

Fed has purchased $252 billion of Treasuries

joey — Thu, 13 Aug 2009 20:23:23 +0000

On Tuesday, August 11th, the Federal Reserve purchased an additional $2.7 billion of US Department of Treasury bonds maturing from August 2026 through May 2039, essentially 17-30 year bond maturity dates. In March, the Federal Reserve stated it would purchase up to $300 billion in US Treasuries through September.

Yesterday, Aug 12th, it announced it will extend the Treasury purchase program until October and keep the current limit of $300 billion. By extending the deadline for the Treasury purchase program, the Federal Reserve keeps the possibility open it might want to expand the program, if it determines necessary. As of Tuesday, Aug 11th, it has aquired a total of $252.7 billion out of its $300 billion goal in US Treasury debt according to its balance sheet.

Bloomberg article on $2.7 billion purchase: http://joeyconway.com/zzkb62
Bloomberg Fed Treasury Purchase Ticker: http://joeyconway.com/rffndg
Federal Reserve August 11th Purchase Announcement: http://joeyconway.com/pkzbky

Federal Reserve purchase of GSE Debt and Securities

joey — Sun, 02 Aug 2009 03:34:16 +0000

Unconventional monetary policy announced by the Federal Reserve Open Market Committee on March 18 2009:

“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.”

Essentially the Federal Reserve has announced its forcasted purchases for 2009 which will expand its balance sheet. It has forecasted for 2009, purchases of up to $1.25 trillion in agency mortgage-backed securities and $200 billion in agengy debt. It has forecasted from March to September of 2009, purchases of up to $300 billion of longer-term US Department of Treasury securities. All these forecasted purchases for 2009 will result in a total $1.75 trillion increase of the Federal Reserve’s balance sheet over 2008.

The Fed will need to fund itself in order to purchase all of these securities and debt from the markets. The Federal Reserve has three methods of funding: the Fed can borrow the funds, the Fed can ask the Treasury to borrow funds, or it can print money/credit commercial banks’ reserve balances at the Fed.

Federal Reserve Press Release on March 18 2009: http://joeyconway.com/krxy8n

US Budget Watch Summary of Press Release: http://joeyconway.com/94kebt