WASHINGTON (AP) - Demand surged this month from investors
seeking to participate in a government program aimed at
jump-starting lending to consumers and small businesses.
Investors requested $10.6 billion worth of loans, the Federal
Reserve Bank of New York said Tuesday. That's up from just $1.7
billion in loans last month, and $4.7 billion in requests from the
initial round in March.
Investors use the money to buy securities backed by auto and
student loans, credit cards, loans guaranteed by the Small Business
Administration and loans backed by business equipment.
The goal of the program, created by the Federal Reserve and the
Treasury Department, is to boost the availability of loans to
consumers and businesses at cheaper rates. Spurring such lending
will help the economy.
The Term Asset-Backed Securities Loan Facility, or TALF, figures
prominently in efforts by the Fed and the Obama administration to
ease credit stresses and stabilize the financial system. Those are
critical elements needed to lift the country out of recession.
The TALF has the potential to generate up to $1 trillion in
lending for households and businesses.
Of the $10.6 billion in loans that will be made available in
May, $5.5 billion was for securities backed by credit cards, $2.3
billion for securities backed by student loans and $2.2 billion for
securities backed by auto loans. The rest of the money requested
was for securities backed by the SBA and business equipment.
"After getting off to a slow start, the larger size of today's
operation will probably be seen as evidence of the program's
success," said Michael Feroli, economist at JPMorgan Economics.
In June, the Fed will start offering investors loans to buy
securities backed by commercial real estate loans. The commercial
real estate market also has been hard hit by the worst financial
crisis since the 1930s.
The Fed hopes that part of the TALF will boost the availability
of these loans, help prevent defaults on commercial properties like
office parks and malls, and facilitate the sale of distressed
The TALF program had gotten off to a lethargic start. It has
been hobbled by rule changes, investor worries about financial
privacy and fears that participants might become ensnared in an
anti-bailout backlash from the public and Congress.