As part of the U.S. government’s plan to bailout the troubled financial system, the Federal Reserve Board announced that it is prepared to substantially expand its Term Asset-Backed Securities Loan Facility.

The proposed expansion could increase the TALF to as much as US$1 trillion and could broaden the eligible collateral to encompass other types of newly issued AAA-rated asset-backed securities, such as commercial mortgage-backed securities, private-label residential mortgage-backed securities, and other asset-backed securities, it explained.

“The Board’s objective in expanding the TALF would be to provide additional assistance to financial markets and institutions in meeting the credit needs of households and businesses and thus to support overall economic growth in the current period of severe financial strains,” it said, adding that decisions concerning the expansion of the TALF, which will be made in consultation with the US Treasury, “will draw on initial experience in administering the program and the Board’s assessment of the likely effectiveness of possible enhancements to the program in advancing its broad economic goals.”

The Fed said that the expansion of the TALF would be supported by the provision by the Treasury of additional funds from the Troubled Asset Relief Program.

IE