WASHINGTON — In its first three days of operation, investors requested $4.7 billion from a program the Obama administration hopes will revive lending in several consumer sectors.
The Federal Reserve Bank of New York said late Thursday that the Term Asset-Backed Securities Loan Facility will direct $2.8 billion to investors pledging securities backed by credit card loans as collateral. The remaining $1.9 billion will go to investors with securities backed by auto loans.
In this first round of Talf loans, no funds will be distributed to investors with securities backed by student or small business loans.
The funds will be paid on March 25 but the total pales in comparison to the $1 trillion the Federal Reserve Board has promised to lend through the Talf.
In light of the intense scrutiny of American International Group Inc. by lawmakers this week, concern has grown in recent days that investors might shy away from the Talf to avoid becoming the next subject of scorn on Capitol Hill.
Still, William Dudley, the president of the New York Fed, seemed encouraged by the numbers.
"This is a good start for a program that we will continue to build on in the future," he said in a press release. "It is encouraging that the spreads in the areas where the program is now focused have narrowed significantly. Our goal is to get the securitization market working again."
Under the Talf, the Fed lends to investors, which use the money to buy securities backed by consumer loans. The goal is to liquefy the markets for consumer debt by providing an incentive for investors to buy the securities.
The Fed is sticking mostly to lending against auto, credit card, student loan and small business loans but in a statement Wednesday, the central bank’s policymaking committee said it "anticipates the range of eligible collateral is likely to be expanded to include other financial assets."
The New York Fed said it will take requests from investors for the next round of Talf loans on April 7. Those funds will be distributed on April 14.