The Term Asset-Backed Securities Loan Facility is likely to attract even more demand next month, Federal Reserve Board Chairman Ben Bernanke told a House lawmaker last week.
The Federal Reserve Bank of New York received $10.9 billion of loan requests under the program this month after taking in just $1.7 billion in April. "Early indications are that demand for Talf loans in June will be even higher," Bernanke wrote in a letter dated May 12 to Rep. Keith Ellison.
The Minnesota Democrat wrote to Bernanke seeking information on the health of the market for asset-backed securities; the Fed chief said the market was improving. Ellison also asked how the Fed could trust the triple-A ratings attached to the collateral it takes under the facility. "Federal Reserve economists have carefully reviewed the methodologies that the rating agencies are employing to analyze the types of ABS that are eligible to be financed in the Talf program," Bernanke wrote.