August 6, 2009
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News: TALF Deals Total $6.5 Billion
Once again the financial industry made their bids for the Term Asset-Backed Securities Loan Facility (TALF). Investors didn't waste any time taking advantage of the eligible deals just two days ahead of the Federal Reserve's deadline. This month eligible credit card securities totaled $2.7 billion. The largest portion was $1.75 billion of General Electric's (GE) credit card securities. The original GE bid was set at $1.25 billion but was increased due to investor interest. World Financial Network and First National Bank of Omaha took advantage of the TALF by selling a total of $1 billion in card securities. Over all, the total TALF deals for this month totaled $6.5 billion. The fact that investors are expressing an increased interest in credit card securities is a positive sign for the economy.
Demand for the securities have increased in light of the recent trend where lenders have cut risks by reducing credit limits and offering fewer incentives to consumers. In the wake of the recession, consumers have reduced credit card spending and increased their dependency on cash and debit cards. Their change in spending habits has also contributed to the reduction of eligible credit card securities. Most of the card securities are branded cards that consumers use for spending at retail stores that generally consists of non-essential items.
In addition to the credit card securities offered for Augusts' TALF, there were $3 billion of student loans offered by SLM and SLC Student Loan Trusts, $700 million by Wheels in fleet lease equipment and $255 million in Omni auto loans. The TALF was designed to stimulate the ailing financial industry and to boost credit availability. The goal is to provide low cost credit to bond buyers. TALF has also been credited with the revival of the ABS market. To date over $53 billion of the ABS securities have been sold through the TALF program.