In Addition to TALF, More Credit for Small Business

Last week, we reported on the expanded $200 billion joint Fed and Treasury program, known as the Term Asset-Backed Securities Loan Facility, or TALF. TALF’s purpose is to induce investors to buy up AAA-rated securities backed by new consumer and small business loans by offering low-interest loans. The idea is to get up to $1 trillion in credit flowing to Main Street borrowers.

Back in December, Dennis Moroney, a research director at TowerGroup, a financial-services industry research firm based in Needham, Mass., criticized the plan in a report on TALF’s impact on the asset-backed securities market. In the report, Moroney and co-author and fellow research director Bobbie Britting said they felt the original pool of possible loans was too small. But since the potential pool has been increased, they thought TALF was significantly improved and could really help consumers and small business owners seeking loans.

Now more government efforts are in the works, the Wall Street Journal reported Monday, though the size of the program is unclear:

Mr. Geithner said Monday that the Obama administration will launch a plan next week that will provide financing, liquidity and guarantees to open up small-business lending, which is seen as a crucial element of economic recovery.

Mr. Geithner’s Monday briefing followed his Feb. 10 announcement that the administration was working on a “small-business and community-bank lending initiative” that would have several components. It would finance the purchase of highly rated Small Business Administration loans, increase the government guarantee for SBA loans, and reduce the fees on certain SBA loans, among other things.

Stay tuned.

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