Two Ways to Encourage Lending

While it may not be a big surprise to those who follow the credit markets, The Federal Reserve Board and Treasury have officially extended the Term Asset-Backed Securities Loan Facility (TALF). TALF lends money to firms who securitize certain types of consumer, business or commercial loans into asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS).

These programs are intended to help the economy by encouraging lending, by providing lenders with the cash flow they'd get from securitizing the loans and selling them through the credit markets. But since those markets are still not functioning normally, fewer loans are being made, thereby stunting economic growth.

The program was originally slated to stop at year-end. Now, TALF for, "newly issued ABS and legacy CMBS" will continue to run through March 31, 2010. The deadline will be longer for new issues of CMBS, running through June 30, 2010, according to the Fed's announcement.