With the stated goal of generating up to $1 trillion in lending for businesses and households, the Federal Reserve and Department of the Treasury have rolled out their plan to lend up to $200 billion by the end of the month. Part of the Term Asset-Backed Securities Loan Facility (the bigger the program, the more words allotted to it), the cash infusion is aimed at "eligible owners of certain AAA-rated asset-backed securities backed by newly and recently originated auto loans, credit card loans, student loans and SBA-guaranteed small-business loans."
That's good news for small-biz owners, even if the money is coming in a roundabout way.
What it means is that investors will get financing--based on the pledge of eligible collateral to back up the loan--so they can buy certain asset-backed securities. Which means banks will get a cash infusion from those investors. Which means small-biz owners should be able to get more cash from those banks.
This is the first monthly infusion of TARF dollars, which is part of the Consumer and Business Lending Initiative. The initiative is trying to get the securitization of highly rated loans back on track because banks rely so heavily on packaging loans in that way to fund further lending.
The monthly infusions are scheduled to last through December of this year but could be extended if needed, according to a joing Fed-Treasury announcement.
For a more detailed look at TALF and CBLI, visit the newly created website.