Fed Announces Agreement with Treasury on Reduction of Credit Protection for TALF

This story appeared in Bank Digest.

The Federal Reserve Board has announced its agreement with the Treasury Department that it was appropriate for Treasury to reduce from $20 billion to $4.3 billion the credit protection provided for the Term Asset-Backed Securities Loan Facility (TALF) under the Troubled Asset Relief Program. The Fed had authorized up to $200 billion in TALF loans, but when the program closed on June 30, 2010, there were $43 billion in loans outstanding. To date, the TALF program has experienced no losses and all outstanding TALF loans are well collateralized. The Fed believes it is highly likely that the accumulated excess interest spread will cover any loan losses that may occur without recourse to the dedicated TARP funds.