TIME’s Massimo Calabresi has a really interesting little piece about the spectacular lack of interest in the latest round of Term Asset-Backed Securities Loan Facility lending. TALF has $200 billion in potential funding. Last month it loaned $4.7 billion. This month, just $1.7 billion. Writes Massimo:
There are three possible reasons for the shortfall in demand. First, there have been disagreements over terms between some of the dealers who are packaging consumer loans and the investors they want to sell them to. The New York Fed has engaged both sides in several of these disputes and believes it can resolve the problems, says the Fed official. The second potential reason for the TALF shortfall is fear of retroactive penalties from Washington. “There’s nervousness about the possibility of retroactive action by Congress,” says a government official.
The last possibility may be the most worrying — that there has been a fundamental shift in the appetite for nonbank securitized loans, which previously represented some 40% of U.S. consumer lending. “The Fed and Treasury have said we’re prepared to lend up to $200 billion for small business, auto, student and other kinds of loans, but what is the market for them?” says the Fed official. “You still have to figure out what the demand is at this point, because of the state of the economy and whether people are comfortable doing these [securitized nonbank loans].”