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The Federal Reserve’s Term Asset-Backed Securities Loan Facility

Author

Listed:
  • Adam B. Ashcraft
  • Allan M. Malz
  • Zoltan Pozsar

Abstract

The securitization markets for consumer and business asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS), which supply a substantial share of credit to consumers and small businesses, came to a near-complete halt in the fall of 2008, as investors responded to a drastic decline in funding liquidity by curtailing their participation in these markets. In response, the Federal Reserve introduced the TALF program, which extended term loans collateralized by securities to buyers of certain high-quality ABS and CMBS, as part of a broad array of emergency liquidity measures intended to avert lasting harm to the economy. This article describes the TALF program and operations in detail, explains how the terms and conditions of the TALF were intended to restore market liquidity while limiting the risk of loss to the public, and assesses the efficacy of the program. The authors find that, while it is hard to isolate the effect of the TALF, the facility is likely to have made a significant contribution to restoring liquidity in 2009 and 2010.

Suggested Citation

  • Adam B. Ashcraft & Allan M. Malz & Zoltan Pozsar, 2012. "The Federal Reserve’s Term Asset-Backed Securities Loan Facility," Economic Policy Review, Federal Reserve Bank of New York, vol. 18(Nov), pages 29-66.
    • Handle: RePEc:fip:fednep:y:2012:i:nov:p:29-66:n:v.18no.3
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    References listed on IDEAS

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    1. Adam Ashcraft & Nicolae Gârleanu & Lasse Heje Pedersen, 2011. "Two Monetary Tools: Interest Rates and Haircuts," NBER Chapters, in: NBER Macroeconomics Annual 2010, volume 25, pages 143-180, National Bureau of Economic Research, Inc.
    2. Campbell, Sean & Covitz, Daniel & Nelson, William & Pence, Karen, 2011. "Securitization markets and central banking: An evaluation of the term asset-backed securities loan facility," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 518-531.
    3. William Dudley, 2009. "A preliminary assessment of the TALF," Speech 6, Federal Reserve Bank of New York.
    4. Kenneth J. Robinson, 2009. "TALF: Jump-starting the securitization markets," Economic Letter, Federal Reserve Bank of Dallas, vol. 4(aug).
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    Citations

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    Cited by:

    1. Emmanuel Carré & Laurent Le Maux, 2018. "Globalisation financière et Dollar Swap Lines : la Réserve fédérale et la Banque centrale européenne durant la crise de 2007-2009," Working Papers hal-01933930, HAL.
    2. Tobias Adrian & Adam B. Ashcraft & Nicola Cetorelli, 2013. "Shadow bank monitoring," Staff Reports 638, Federal Reserve Bank of New York.
    3. Iorgova, Silvia & Ross, Chase P., 2023. "Investor information and bank instability during the European debt crisis," Journal of Financial Stability, Elsevier, vol. 64(C).
    4. Alyssa G. Anderson, 2015. "Ambiguity in Securitization Markets," Finance and Economics Discussion Series 2015-33, Board of Governors of the Federal Reserve System (U.S.).
    5. Marco Di Maggio & Amir Kermani & Christopher Palmer, 2016. "How Quantitative Easing Works: Evidence on the Refinancing Channel," NBER Working Papers 22638, National Bureau of Economic Research, Inc.
    6. Christopoulos, Andreas D. & Jarrow, Robert A., 2018. "CMBS market efficiency: The crisis and the recovery," Journal of Financial Stability, Elsevier, vol. 36(C), pages 159-186.
    7. Tobias Adrian, 2014. "Financial stability policies for shadow banking," Staff Reports 664, Federal Reserve Bank of New York.
    8. Gaballo, Gaetano & Marimon, Ramon, 2021. "Breaking the spell with credit-easing: Self-confirming credit crises in competitive search economies," Journal of Monetary Economics, Elsevier, vol. 119(C), pages 1-20.
    9. repec:hal:cepnwp:hal-01933930 is not listed on IDEAS
    10. Anderson, Alyssa Gray, 2019. "Ambiguity in securitization markets," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 231-255.

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    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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