TSLF and TALF Facilities in the United States

TALF is a bank facility that was created on 25 of November 2008 by United States Federal Reserve Bank of New York (FRBNY). This program was created to offer support in issuing asset-backed-securities (ABS) where the collaterals are for example loans for students, loans with Small-Business-Administration (SBA) guarantee, loans for credit cards and also auto loans.Advertising We will write a custom report sample on TSLF and TALF Facilities in the United States specifically for you for only $16.05 $11/page Learn More The Federal Reserve Bank of New York (FRBNY) had originally planned to lend to a tune $200 billion but later increased the amount under this TALF program/facility to $1 trillion. The lending was to target certain people who are holders of loans, are AAA-rated and are also supported by the SBA for small amounts of loans meant for business and consumption. On the other hand, TSLF is a financial facility which is meant to offer the United States t reasury general collateral (GC). The general collateral (GC) is offered to the Federal Reserve Bank based in New York and in reiteration the treasury gets other programs which also have eligibility for collaterals. TSLFs main intention and purpose is to enable liquidity in the markets for the United States treasury and therefore improve on the performance of financial markets. TSLF is usually a facility for 28 days targeting the primary dealers based in New York’s Federal Reserve Bank. The primary dealers have to bid in a competitive way in auctions which are singly priced and are held on weekly basis. The program-eligible collateral is pledged by the borrowers (Federal Reserve Bank of New York, pg.1). Contrary to the money under the TSLF financial facility the TALF monies do not usually come through the US treasury. To be in a position to lend money under the TSLF facility the Federal Reserve Bank of New York has to seek the legal approval from the legislature which is the h ouse of congress. This is because the monies under the facility are disbursed from the United States treasury. On the other hand, under TALF facility no congressional approval is required to undertake the program since it emanates from the bank itself. The agreement under TSLF is basically security for other securities or security-security and therefore does not impact on the level of reserves for the Federal Reserve Bank while TALF facility affects the reserve levels in the bank. Under the TSLF, the Federal Reserve determines the collateral eligibility criteria. As the situation is today, collateral is determined by the eligibility to purchase again the tri-party agreements. Agreements for tri-party are only arranged through the trading desk on open markets and other kinds of assets, mortgage, municipal and corporate securities. The Federal Reserve closed the extension of new loans in line with securities backed by mortgage under TALF facility on 30th June 2010 and on March 31 2010 closed extensions on other types of securities backed loans (Federal Reserve Bank of New York, pg.1).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The objective TALF which was created in 2008 by the Federal Reserve Bank and consequently began operations in March 2009 was to help participants and other operators undertaking business ventures to be in a position to meet the needs for credit in doing business, credit required for their household needs and also for others to be able to own small scale businesses. On the other hand, the intention behind the TSLF facility which was created also in March 2008 was for enhancement of liquidity in the United States treasury. It was also meant to promote liquidity in other operating collateral markets. The liquidity was to enable the financial markets to become more vibrant generally. TSLF Options Program (TOP) was created by the bank in July 200 8 and consequently suspended in October 2009 as the bank introduced another option of borrowing the securities from treasury for a short duration of time and in specific dates. This kind of borrowing was supposed to follow a certain collateral eligibility criteria. Though they had own challenges in creation and subsequent implementation TSLF and TALF transformed the United States financial markets as compared to the traditional monetary policy tools like increasing and decreasing bank interest rates to ensure certain levels of liquidity or use of open market operations (International Business Publications, pp.1-15). Works Cited Federal Reserve Bank of New York. Term Asset-Backed Securities Loan Facility. March 2008. 10 July 2010 http: www.newyork.org/markets/talf.html. Federal Reserve Bank of New York. Term securities lending facility. March 2008. 10 July 2010 http:www.newyork.org/markets/tslf.html. International Business Publication. US Federal Reserve System Handbook. New York, I nternational Business Publications, 2006. Print. This report on TSLF and TALF Facilities in the United States was written and submitted by user Quinn Flynn to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.