Tuesday, April 7, 2009

TALF and the Treasury in the News

The TALF (Term Asset-Backed Securities Lending Facility) is a Federal Reserve Program that offers financing to the still-frozen asset backed securities markets, a market crucial to mortgage lending, auto finance, and credit card finance. This program was designed to provide nearly a trillion dollars of funding to jump start the ABS market. So far, $ 2 billion have been done. At this rate, the program will take fifty years to reach fruition! What went wrong? Answer: ? Yes, you guessed it -- Obama and the Congress. By insisting on punitive attacks on TARP recipients regarding executive compensation, the hiring on non-US employees, and entertainment and travel, Obama and the Congress have frightened away participants. TALF uses TARP money. That means anyone who participates may soon face the inquisition. No one wants to appear before Barney's committee and listen to his opinions on capitalism. We (and they) already know what he thinks of capitalism. Better to stay away from the TALF. Thanks Mr. President, thanks Barney...so much for the TALF.

Today starts another avalanche of Treasury securities sales to finance the dreams of President Obama (and the nightmares of the business community). This week $ 58 billion in treasuries will be sold to an increasingly disbelieving set of buyers. A record $ 35 billion of three year notes will be sold on Wednesday with a $ 6 billion in 10 year TIPS today and $ 18 billion of ten year notes on Thursday. Whew! And this is just the beginning! A minimum of $ 2.5 trillion in treasuries is slated for sale this year -- three times more than has ever come to market in a single year in history. It is not clear that the credit rating of the US will survive this administration. Wonder what Plan B is when the market can no longer absorb the Obama debt landslide?