Reply #3: Fed's consumer plan to start later in February

[Demeter]

WHAT'S THIS? YOU SAY, SOMEBODY ACTUALLY HAS A PLAN?

http://www.marketwatch.com/news/story/new-consumer-loan-facility-track/story.aspx?guid={EE91BB10-5074-4430-825C-2D4D7CDB029B}&siteid=yahoomy


WASHINGTON (MarketWatch) -- A new program to try to get credit flowing for small business and consumers is on track to start later this month, the Federal Reserve said Friday.

In a statement, the Fed didn't specify a date, but disclosed more details of the terms and conditions of the loans.

There's a lot riding on the initiative, known as the term-asset-backed securities loan facility, or TALF, which is seen as a new model for the Fed's efforts to reopen clogged credit channels.

The asset-backed securities market for consumer loans has come "to a near standstill," the Fed said.
In particular, the Fed will set up a special-purpose vehicle to purchase and manage the assets and the Treasury will invest in the program to protect the Fed from losses.

Under the plan, the Fed will lend up to $200 billion to owners of certain AAA-rated asset-backed-securities backed by auto loans, credit-card loans, student loans and small business loans.

The New York Fed will announce monthly loan subscriptions and settlement dates.

Borrowers will be able to choose either fixed or floating interest rates on the TALF loans.

The fixed interest rate will be 100 basis points over the 3-month Libor swap rate, while the floating interest rate will be 100 basis points over 1-month Libor.

The central bank also published preliminary collateral haircuts for the securities, depending on the expected life of the loans.

Greg Robb is a senior reporter for MarketWatch in Washington.