IP P®OSPE©TIVE

In what has been touted as a sequel to TARP, the Fed and Treasury launched the Term Asset-Backed Securities Loan Facility (TALF) today to try and shore up small business loans.  In short, the Federal Reserve Bank of New York will lend up to $200 Billion to eligible owners of eligible collateral that seek funding.  I emphasize “eligible” because the money only applies to entities that own certain asset-backed securities that are of the highest grade of investment.  In other words, loans will only be made to investors and purchasers of AAA-rated asset-backed securities that have been issued very recently.  At first glance, this type of lending facilitation is only geared toward high grade investments, and does nothing to help the root of the problem: low grade investments.  Economist Tim Duy has a few words to that end.   Nevertheless, the effort may have a trickle-down effect that pumps money where we need it most.  Here is to hoping.

The interest, and relevant, part of these events is the emphasis that is placed on “eligible collateral”.  The government has recently tried to open up lending channels by expanding those assets that may be acceptable as collateral.  This doesn’t seem to be one of those actions.  The launching of TALF, however, comes at an interesting time, because this is also the week that WIPO is meeting to discuss the emergence of IP financing.  As one market seems to tighten its belt with regard to risk-aversion in lending, another market seems to be discussing possibilities of opening new channels for lending with a certain optimism and prospective promise.  This small but interesting paradox is something to ponder . . .

For those of you who wish to learn more about obtaining a loan from TALF but don’t want to wade through the Fed’s explanation, I have created a short outline of the Terms and Conditions. VIEW THE TALF OUTLINE HERE.

” . . . the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans. Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans, and subscriptions for funding in March will be accepted on March 17, 2009. On March 25, 2009, those new securitizations will be funded by the program, creating new lending capacity for additional future loans.”[1]

KEY DATES FOR TALF LOANS

Schedule for First Funding with Initial Eligible Assets

March 3, 2009 Launch of the TALF. Publication of the details for the first funding

March 3-17, 2009 Marketing first funding to investors

March 17, 2009 Subscriptions for first funding for TALF recorded

March 25, 2009 First funds from the TALF dispersed

Schedule for Second Funding

March 24, 2009 Announcement of details of second funding

March 24-April 7, 2009 Marketing second funding to investors

April 7, 2009 Subscriptions for second funding for TALF recorded

April 14, 2009 Second funds from the TALF dispersed

[1] Wall Street Journal, “Real Time Economics” blog, at http://blogs.wsj.com/economics/2009/03/03/fed-treasury-statement-on-launch-of-talf/.