July 3, 2009

• News:  TALF Under Attack

  Some credit card issuers are asking the Federal Reserve to modify its Term Asset-Backed Securities Loan Facility (TALF) to make them eligible to participate in the program. Wells Fargo, U.S. Bank, and BB&T all have billions of dollars of credit card receivables on their books and yet under the current terms of the TALF do not qualify to issue asset-backed bonds. Target also has outstanding credit card balances of over $8.5 billion plus $900 million of bonds that are due to mature in October 2010. The rule in question pertains to the volume of bonds an organization has maturing in 2009. Lenders who have not previously issued bonds for these securities or those who have none maturing in 2009 are eliminated from the TALF.
  
  The restrictions in question pertain to credit card companies only. Under certain guidelines, auto loans, student loans, and various other types of credit are included in the TALF. The major premise behind the TALF was to stimulate the financial industry and boost credit availability. The goal was to provide low cost credit to bond buyers. It appears the Fed has successfully financed the irresponsible actions of major financial institutions while stomping on the little guys; all with taxpayers' money. Advocates to review the TALF restrictions say the Fed's aim to keep credit flowing has actually been restricted by the provision. Furthermore, they say removal of the restriction in question would even out the playing field and give other credit card companies an opportunity to be more competitive.
  
  Other credit card companies eliminated by the TALF restrictions include Comerican, Fifth Third Bank, and PNC Financial Services Group. As these organizations continue their pursuit in becoming part of the Federal program, other larger financial institutions have begun finding alternative avenues of funding. Last month both JPMorgan and CitiBank participated in selling asset backed debt to investors outside the Fed TALF program.
  
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