question for toro and david

[wimpy77]

what do you guys think about this TALF thing?

 

[DavidS]

I don't know enough about it to comment. I find the level of government intervention to be almost nauseating... but hell, I guess if we're going to go in, we should go ALL in.

 

[wimpy77]

i think the treasury and fed are going to try and fix this stuff at all cost and except the consequences later.

 

[Toro]

I'm not sure, but I thought this was interesting.

The Federal Reserve is expected to announce details of its Term Asset-Backed Securities Loan Facility (TALF) today, a facility that will fund up to $1 trillion of non-recourse loans to investors who purchase AAA-rated asset-backed securities. The program could represent a turning point for the economy and the financial markets by jump-starting lending in critical areas of the economy and by reviving the asset-backed securities market, where issuance has fallen to a crawl, from a pace of about $1.5 trillion to $2.0 trillion in 2005 to 2007. The program is designed to revive lending for automobile loans and leases, credit card loans, student loans and small business loans guaranteed by the Small Business Administration. If it works, a swath of economic data will be impacted, probably by the end of the second quarter or early in the third quarter, altering perceptions about the economy and boosting household, business and investor sentiment.

It is easy to understand how the TALF could turn the tide in the financial and economic crisis. Picture this: as a result of the TALF, car sales stabilize. In turn, the factory-laden economic calendar begins to cast off a new message and a plethora of data show signs of reaching a trough: durable goods orders, factory orders, industrial production, the Philadelphia Fed survey, the Chicago index, the New York Empire survey, the ISM index and retail sales. Indications of a bottom then begin to dominate the news flow, affecting sentiment. The process eventually feeds on itself. Confidence in this outcome increases when one considers the massive fiscal stimulus program that will begin hitting the tape in the second quarter.

http://tonycrescenzi.rmblogs.thestreet.com/entry.aspx?q=b861ce96-9391-4c78-b558-9bc100aa8e95

The TALF will provide stable funding for those wanting to purchase assets. That's important because lenders kept changing the terms of loans.

 

[DavidS]

I'm not sure, but I thought this was interesting.

The Federal Reserve is expected to announce details of its Term Asset-Backed Securities Loan Facility (TALF) today, a facility that will fund up to $1 trillion of non-recourse loans to investors who purchase AAA-rated asset-backed securities. The program could represent a turning point for the economy and the financial markets by jump-starting lending in critical areas of the economy and by reviving the asset-backed securities market, where issuance has fallen to a crawl, from a pace of about $1.5 trillion to $2.0 trillion in 2005 to 2007. The program is designed to revive lending for automobile loans and leases, credit card loans, student loans and small business loans guaranteed by the Small Business Administration. If it works, a swath of economic data will be impacted, probably by the end of the second quarter or early in the third quarter, altering perceptions about the economy and boosting household, business and investor sentiment.

It is easy to understand how the TALF could turn the tide in the financial and economic crisis. Picture this: as a result of the TALF, car sales stabilize. In turn, the factory-laden economic calendar begins to cast off a new message and a plethora of data show signs of reaching a trough: durable goods orders, factory orders, industrial production, the Philadelphia Fed survey, the Chicago index, the New York Empire survey, the ISM index and retail sales. Indications of a bottom then begin to dominate the news flow, affecting sentiment. The process eventually feeds on itself. Confidence in this outcome increases when one considers the massive fiscal stimulus program that will begin hitting the tape in the second quarter.

http://tonycrescenzi.rmblogs.thestreet.com/entry.aspx?q=b861ce96-9391-4c78-b558-9bc100aa8e95

The TALF will provide stable funding for those wanting to purchase assets. That's important because lenders kept changing the terms of loans.

1 trillion dollars plus the hundreds of billions for fannie mae and freddie mac, plus bear sterns, plus aig, plus the bailout bill, plus the stimulus package, plus terp, plus the 9000 earmarks bill, plus a 4 trillion budget... are we at all running a risk for de-valuing our currency if we keep printing more and more and more money? I've lost count as to how much money we've spent in the past year. March 14th is the one-year anniversary of it all.

 

[wimpy77]

like i said in another thread they will do whatever it takes to get this thing rolling and worry about the consequences later

 

[DavidS]

like i said in another thread they will do whatever it takes to get this thing rolling and worry about the consequences later

So what happens when we approach the bridge of consequences? We knew at least two years about this upcoming recession and what was causing it and we did nothing.

We have a patient who is unable to breath on the table so we do a tracheotomy. But the tracheotomy causes an infection so we put the patient on antibiotics which causes other problems... are we delaying the inevitable here?

What is the long-term, not short-term, the long-term solution to fixing this economy?

 

[Toro]

1 trillion dollars plus the hundreds of billions for fannie mae and freddie mac, plus bear sterns, plus aig, plus the bailout bill, plus the stimulus package, plus terp, plus the 9000 earmarks bill, plus a 4 trillion budget... are we at all running a risk for de-valuing our currency if we keep printing more and more and more money? I've lost count as to how much money we've spent in the past year. March 14th is the one-year anniversary of it all.

Where's gonegolfin when you need him?!

The TALF can best be thought of as a credit line, not as an increase in the monetary base. Essentially, the Fed is going to lend money at below market rates so that funds can buy assets and restart the securitization market.

This could be huge. If the TALF is $1 trillion, and funds use 9:1 leverage, funds could buy up to $9 trillion in securities. When the program winds down, then the funds are withdrawn and the $1 trillion disappears off the Fed's balance sheet.

 

[wimpy77]

barnanke has said once this thing ends they will have to raise interest rates and more than likely taxes. this problem i believed could have done more to help last year but paulson waited for this administration to fix it. now we are behind the curve and people have criticized this administration for playing what amounts to catch up. but at this point they have had no choice.

 

[wimpy77]

1 trillion dollars plus the hundreds of billions for fannie mae and freddie mac, plus bear sterns, plus aig, plus the bailout bill, plus the stimulus package, plus terp, plus the 9000 earmarks bill, plus a 4 trillion budget... are we at all running a risk for de-valuing our currency if we keep printing more and more and more money? I've lost count as to how much money we've spent in the past year. March 14th is the one-year anniversary of it all.

Where's gonegolfin when you need him?!

The TALF can best be thought of as a credit line, not as an increase in the monetary base. Essentially, the Fed is going to lend money at below market rates so that funds can buy assets and restart the securitization market.

This could be huge. If the TALF is $1 trillion, and funds use 9:1 leverage, funds could buy up to $9 trillion in securities. When the program winds down, then the funds are withdrawn and the $1 trillion disappears off the Fed's balance sheet.

yeah gonegolfin can explain this stuff better than most people.