GAO Assesses TALF Risks to TARP

This story appeared in Bank Digest.

The Government Accountability Office has issued a report assessing the risk posed by the Term Asset-Backed Securities Loan Facility (TALF) to the Troubled Asset Relief Program (TARP). TALF was created by the Federal Reserve Board to help meet consumer and small business credit needs by supporting issuance of asset-backed securities and commercial mortgage backed securities (CMBS). The GAO report also examines the Treasury Department’s role in decision making for TALF and the condition of securitization markets before and after TALF.

As part of its review, the GAO examined program documents, analyzed data from prospectuses and other sources and interviewed relevant agency officials and TALF participants. The GAO recommended that the Treasury Department should: give increased attention to reviewing risks posed by CMBS; strengthen its TALF decision-making process; and determine which data are needed to track the management and sale of assets TALF borrowers might surrender. The report also noted that to enable more effective review of TARP, Congress also should grant GAO authority to audit the Fed’s TALF operational and administrative activities.