Michael Pedroni, EVP and Managing Director of International Affairs at MFA, explains the Term Asset-Backed Securities Lending Facility (TAF) and how it benefits three key groups. He describes how the TAF helps American individuals and businesses access borrowing for education and car purchases, supports investors and pension funds with reliable Federal Reserve financing, and benefits taxpayers through program earnings.
Key takeaways:
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Diversifying financing through programs like the Term Asset-Backed Securities Loan Facility (TALF/TAF) supports lending to consumers and businesses, making it easier to access credit for major expenses like education and vehicles.
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The facility provides stable liquidity to investors and pension funds, enabling them to continue supporting economic activity even during periods of financial stress.
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By generating returns for the government such as the $680 million earned in 2009 the program not only carries relatively low risk but also benefits taxpayers by reducing future funding needs through taxes or borrowing.
Transcript:
Today I’m here to talk to you about the term asset backed securities lending facility. And I’ve mentioned in two previous posts that we have three groups that really win from the TAF. The first group are the American individuals and businesses that need to borrow for paying for college or to purchase a car. The second group that wins are the investors and the pension funds that they serve who get reliable sources of financing from the Federal Reserve. The third group that wins is the taxpayer.
And we know this because in two thousand and nine, when the last time that the Federal Reserve ran a TAF program, it earned six eighty million dollars on that program, and that money was sent to the Treasury Department and it reduces the amount that Treasury either has to tax Americans or the amount that the Treasury has to raise in capital markets tomorrow.
So the TAF is one of those unusual tools in the financial policy toolkit. With very little risk to the Fed, the taxpayer, or the private sector, It promotes lending to American individuals and businesses. It helps professional investors to support the economy, and it benefits the taxpayer. For more information on the Emergency Treasury and Federal Reserve facilities, please contact MFA or our COVID-nineteen Resource Center on managedfunds.org.
