The Federal Reserve's Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility

21 Pages Posted: 30 Jan 2016 Last revised: 11 Feb 2016

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: February 1, 2016

Abstract

Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the potential for these circumstances to further weaken the U.S. economy and, as a result, implemented the Term Asset-backed Loan Facility (TALF) to jumpstart the market and mitigate the negative effects on the economy. In this case we discuss the design, usage of the TALF and its impact on the securitization markets during the crisis.

Keywords: Financial Crisis, Federal Reserve, Asset-backed Securities Loan Facility, TALF, ABS

JEL Classification: G01, G28, G23

Suggested Citation

Wiggins, Rosalind and Metrick, Andrew, The Federal Reserve's Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2723614 or http://dx.doi.org/10.2139/ssrn.2723614

Rosalind Wiggins (Contact Author)

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andrew Metrick

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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