Wednesday, April 8, 2009

T-A-L-F = B-A-L-K?

At first glance, it could be presumed that government efforts were creating competing objectives and crowding out capital from some of their programs into others. I could see this being the case with the PPIP, except that the interest in PPIP seems dangerously low (dangerous for the government's politics, good for the taxpayer) as evidenced by the extended application deadline stemming from few requests.

Maybe we are entering uncharted territory. A wonderful new place where investors stop doing business with the government and intend to leave the free market to its own devices.


UPDATE: Accrued Interest raises some good points in TALF: Anoat system?

Fed Requests for TALF Loans Drop 64% to $1.7 Billion (Update2)

"April 7 (Bloomberg) -- The Federal Reserve’s requests from borrowers for loans to buy asset-backed securities fell 64 percent from last month as investors balked at visa limits and possible political efforts to tax earnings.

Investors sought $1.71 billion from the Term Asset-Backed Securities Loan Facility to purchase securities backed by auto and credit-card loans, the New York Fed bank said today on its Web site. The Fed provided $4.7 billion in loans last month to purchase securities in the TALF’s first monthly round.

The decline hinders Fed Chairman Ben S. Bernanke’s efforts to lower borrowing costs and extends a slow start for a program that the Obama administration is using as a cornerstone of plans to revive credit and end the recession. The Fed is struggling to lure investors, such as hedge funds, that are wary of government restrictions or the risk of future intervention.

“It is a big disappointment,” said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut. “There are some folks who have decided they just don’t want to play in any government programs.”

The total amount of securities eligible for TALF loans in April plunged to about $2.6 billion from $8.3 billion in March. The number of securities deals was unchanged at four."

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