Wednesday, November 26, 2008

A new bail out - TALF

Our elected representatives have now added an additional bailout provision. This new provision is Term Asset-Backed Securities Loan Facility (TALF). This new entity will lend $200 Billion. Its objective is to help households and small businesses meet credit needs by supporting the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA). This is no different than sub prime loans with one exception, sub prime loans were backed by an actual structure. With the ABS the collateral is an education or some ones credit card purchase.

In addition, the Federal Reserve will purchase up to $100 billion in Government Sponsored Enterprise (GSE) debt using auctions.

Finally, the Federal Reserve will purchase up to $500 billion in mortgage-backed securities backed from the two white elephants that began this entire debacle GSEs Freddie Mac and Fannie Mae.

The total bailout numbers I have are now:
$2.053 Trillion in bailouts
$225 Billion in potential new bailouts
$3.906 Trillion in loans the taxpayer has agreed to guarantee

The total liability is over $6 trillion. The national debt was at $9.6 Trillion in August 2008!

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