Fed Chair Ben Bernanke (Credit: Chris Hondros/Getty Images)
The
FOMC reported today that it will launch the Term Asset Loan Facility (
TALF) to eventually buy up to $1 trillion in financial assets. These assets include credit card and auto debt as well as commercial and residential mortgages.. In effect, the
Federal Reserve is acting as the
secondary market, which evaporated last year. The Fed's actions will allow banks to sell these assets to businesses that have borrowed money from the Fed. This frees up the banks' funds, allowing them to make new loans.
What It Means to You
The Fed had announced the TALF program last year, but hadn't gotten it fully functioning until now. The Fed is basically telling banks to make new loans. It will works with other businesses to buy up the old ones. The FOMC also announced it will buy an additional $100 billion in credit card debt on the secondary market, and $300 billion in Treasury bonds. The Dow rose 90 points and the dollar fell. Treasury yields dropped, which will put downward pressure on mortgage interest rates.The Fed is committed to restoring trust in financial markets, which will shorten the recession. (Federal Reserve
Press Release, March 18, 2009; AP,
Fed launches bold $1.2 trillion effort to revive financial markets, March 18, 2009; Bloomberg,
Fed's Rosengren Says TALF to Help Revive Credit, March 23, 2009)
Related Articles
Comments