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The government launched a much-awaited Term Asset-Backed Securities Loan Facility (TALF) Tuesday (March 3) to spur lending by providing up to $200 billion in financing to investors to buy up debt.
As reported by the Associated Press, RV consumer and business floorplan loans were included in TALF along with funding for autos, education, credit cards and other consumer loans.
If the program succeeds, it should help bust through the credit clogs in place since last year and make it easier for Americans to finance large and small purchases at lower rates, Federal Reserve Chairman Ben Bernanke told Congress. That, in turn, would help revive the economy, he said.
Created by the Fed and the Treasury Department, the program has the potential to generate up to $1 trillion of lending for businesses and households, the government said. It will be expanded to include commercial real estate, though that won’t be part of the initial rollout.
The program will start off by providing $200 billion in loans to investors with the goal of jump-starting lending to consumers and small businesses. The program was first announced late last year and originally was scheduled to start in February.
Participants – companies and investors that pledge eligible collateral to back the loan – must request the new government loans by March 17. The Fed will provide the three-year loans on March 25.
“We should see immediate benefits to students, to credit cards, to small businesses, to consumer loans,” Bernanke told lawmakers.
Under the program, the Fed will buy securities backed by different types of debt. The credit crunch – the worst since the 1930s – has made it much harder for people to obtain such financing , and those that do can be socked with high rates.
Additional details of the TALF and the CBLI can be found at http://www.financialstability.gov/. Further information on the Federal Reserve’s credit and liquidity programs is available at http://www.federalreserve.gov/monetarypolicy/bst.htm.