In normal times the Federal Reserve responds to crises by using teeny, gold-plated hydraulic levers to raise and lower interest rates. As you may have noticed, a) they already did that, twice, in October, and b) it's still not 'normal times,' unless you've been cryogenically frozen since the 1930s.
What's a central bank to do now? Well, hell, why not just print up more money, wrap it in cute acronyms and throw it out there…
The central bank announced what it called a term asset-backed securities loan facility, a plan under which it will lend up to $200 billion to support the issuance of debt backed by consumer and small-business debt — such as credit-card loans, student debt, auto loans and loans backed by the Small Business Administration.
Because this term asset-backed securities loan facility is crashing into your garage, where it will play wacky pranks and eat your cats, the Fed has dubbed it TALF. Not to be confused with TARP — that was the first one, the famous $700 billion troubled asset relief program that John McCain financed with the sale of his five largest homes. TARP is seeding TALF with about $20 billion (one of John McCain's sheds).
And let's not forget the poor mortgage giants at the heart of this problem, Fannie, Freddie, Ginnie, Mickey, Minnie, and Goofie…
In addition, the Fed said that it would purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, along with up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae (the government-sponsored enterprises, also known as GSEs).
The only disturbing thing about TALF is that, unlike TARP, I guess Ben Bernanke and Henry Paulson didn't need to check with Congress before announcing it?
How callous. Unemployed Americans are losing their homes, and these guys won't even allow us the joy of our national sport: blaming lawmakers for being in favor of a plan and then against it, or vice versa.
Tags: Ben Bernanke, Economy, Federal Reserve, Henry Paulson, TALF, TARP