The Federal Reserve’s incredibly expanding Term Asset-Backed Securities Loan Facility (TALF) just opened for business and now it’s an integral part of the Treasury-led Public-Private Program for Legacy Assets (PPIP). This is probably a good thing, according to some observers, since the Fed and the private equity sector worked very hard to re-work TALF into a less complex, more user-friendly program. In short, the Fed listened to TALF critics, and deals were done once the facility went live last week. The smooth start up was clouded by AIG outrage on Capitol Hill, however, and the confiscatory compensation bill passed by the House.
“A tremendous amount of effort has gone into the TALF,” says Kevin Petrasic, a senior associate in Paul Hastings’ banking and financial services unit and former special counsel of the Office of Thrift Supervision. The compromise was “unprecedented and tremendously important and reaches beyond the banking and financial sectors,” he adds. “Lots of entities will be able to tap into the facility. It is viewed as a method by which folks will be able to get more reasonable interest rates.” The fresh availability of funds will allow small businesses to continue operating, Petrasic notes. The shutdown of the securitization market has “really affected economic input and output.”