The Learning Curve

New tricks for an old dog.

It’s all in the details

The Federal Reserve’s Term Asset-Backed Securities Loan Facility will buy up to $200 billion in securitized loans, including securitized credit card receivables, to boost the credit market.  . . .

Well, that’s the way I think it should be.

However, the Fed’s press statement today said, “The TALF is designed to catalyze the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities.

Is the government buying these investments directly, or is it loaning money to unidentified “investors” to enable them to buy the securities?  Are these new securities being issued and bought, or is it a buy-up of existing securities?  What is the rate of return the government receiving for TALF funds?

Making low interest loans so that investors can buy higher interest securities does not sit well with me.  What is the justification for doing indirectly what could more effectively be done directly?


Written by Tom Fox

03/03/2009 at 12:25 pm

Posted in Credit card debt, Investing

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