The Federal Reserve’s effort to unfreeze markets for securities backed by loans kicked off with requests for $4.7 billion of financing, a total that officials hope will surge to as much as $1 trillion after investors resolve contract terms with dealers and other concerns.
Investors could have used the Term Asset-Backed Securities Loan Facility to finance purchases of as much as $8.3 billion of securities. They asked for $1.9 billion in loans to buy securities backed by auto loans and $2.8 billion for debt linked to credit-card loans, the New York Federal Reserve Bank said on Thursday.
“It’s an encouraging start given all the mechanics people had to work through in a short space of time,” said Richard D’Albert, co-chief investment officer of hedge fund Seer Capital Management LLC in New York. He didn’t participate in the TALF’s first round.
The Obama administration and the Fed are counting on the TALF to unfreeze credit and help bring an end to what may be the worst recession in the postwar era. Fed and Treasury officials are expanding the scale of the program by adding leases of business equipment and other types of loans.