Yet once again in this regard, in tomorrow's press, we have the following story: "Government Announces $200 Billion Lending Program," which, in turn, provides us with a link onto
the front page of Wednesday's WaPo, and this lead article: "As Markets Sink, U.S. Tries to Halt Cycle of Fear."
Term Asset-Backed Securities Loan Facility
The Term Asset-Backed Securities Loan Facility (TALF) is the name of a program created by the US Federal Reserve (the Fed), announced on November 25, 2008. The facility will support 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). Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans.
The Fed explained the reasoning behind the TALF as follows:
New issuance of ABS declined precipitously in September and came to a halt in October. At the same time, interest rate spreads on AAA-rated tranches of ABS soared to levels well outside the range of historical experience, reflecting unusually high risk premiums. The ABS markets historically have funded a substantial share of consumer credit and SBA-guaranteed small business loans. Continued disruption of these markets could significantly limit the availability of credit to households and small businesses and thereby contribute to further weakening of U.S. economic activity. The TALF is designed to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business ABS at more normal interest rate spreads.
Despite trillions already dumped into the failed effort to revive consumer and small business credit over the past year, and even with both our former Republican and current Democratic Presidents publicly complaining about this lack of cooperation from Wall Street to return consumer credit to the marketplace, even now, it's simply mind-boggling how insanity and denial runs rampant in and around the Beltway about this reality.
So, here we go again:
The Federal Reserve and Treasury Department announced the launch of a lending facility for consumer-backed debt that will potentially generate up to $1 trillion in lending. The New York Federal Reserve Bank will lend up to $200 billion to owners of triple-A rated asset-backed securities supported by new and recently originated auto loans, credit card loans, student loans and government-guaranteed small business loans. The Fed and Treasury said the Term Asset-backed Securities Loan Facility, or TALF, is designed to give securitization markets a jolt by offering financing for investors to encourage them to buy AAA-rated asset-backed securities. Markets for the securitization of loans have virtually shut down since the financial crisis worsened in October.
Up to another trillion dollars for supposed "credit" for whom exactly?
The roughly one-third of the population that still might just be able to qualify for it? Well, they don't need it!
(For all intents and purposes, Triple A ["AAA"] credit portfolios, or "prime loans," are comprised of credit paper from only the most creditworthy consumers. And, the most recent/simplistic definition of prime creditworthiness means we're talking about consumers with 720 or higher FICO credit scores. Until a year ago, that number used to be 680. Then, it creeped up to 700 over the past Summer. Now, it's at 720, at best, or higher. That's somewhere between only 33% and 40% of the population...on a good day. The median consumer credit score is 678.)
The other two-thirds of our society--the folks that really do need it and we're talking about folks that also pay their bills--still won't have access to it. (Read the comment, above, re: "...AAA-rated asset-backed securities...")
That's because there'll be nobody around to provide it to them! I'm not saying this; the lenders are, themselves! Yes, most of the major consumer lenders in the U.S. (many of them receiving tens of billions, if not hundreds of billions in taxpayer bailouts, already) have stated that they're either getting out of these lines of business, entirely, or they're drastically cutting back on existing consumers' credit lines, if they haven't done so, already.
As Einstein told us: "The definition of insanity is repeating the same action and expecting a different result."
This is nothing short of a travesty of the highest order.
In terms of helping out U.S. small business, unemployment, the foreclosure crisis, and Main Street, in general, I ask: Where is this $200 billion to $1 trillion supposed to go, and how's it going to get there?
It appears the folks inside the Beltway missed a few "memos." The following companies represent most (not "some," but most) of the consumer point-of-sale, credit card and consumer financing resources in the United States:
CITIGROUP: Intends to "dispose" of their CitiFinancial and consumer credit card divisions, in their entirety, according to most recent reports from their New York boardroom. That's all of their consumer retail lending operations! (If one continues reading here, they'd have to ask: Who would buy it?)
The Wall Street Journal reported on Monday that CitiFinancial, international retail-brokerage operations and the private-label credit-card businesses may also be put on the block. The bank declined to comment...
...But Citigroup may not find it easy to sell other assets, and like insurer American International Group Inc, it could run into problems disposing of units amid the financial crisis, investment bankers said. Few would-be buyers have enough cash, stocks are down, financing is not easily available, and the quality of financial assets is often suspect...
...Selling consumer lending businesses such as private label credit cards and CitiFinancial, which provides loans for home improvement, debt consolidation and tuition, is also likely to prove difficult in an economic downturn as consumers suffer...
GE: Reports have circulated throughout the business press how GE is totally walking away from entire retail business verticals, altogether. In Canada, they just terminated their retail credit programs, altogether! Perhaps even worse than this is what they're doing in the credit card marketplace, where they control significant market share.
In September, General Electric Co shelved plans to sell its $30 billion U.S. private-label credit card business, saying it was a challenging time to find someone who wanted to take responsibility for more than $30 billion of assets.
HSBC: "HSBC to Curtail U.S. Consumer Lending Operations," from just this past weekend.
HSBC to Curtail U.S. Consumer Lending Operations
By CARRICK MOLLENKAMP and SARA SCHAEFER MUñOZ
HSBC Holdings PLC plans to curtail its disastrous foray in U.S. consumer lending by pulling back from key businesses, according to people familiar with the matter, a move that comes as the British bank prepares to raise billions of pounds to shore up capital and possibly hunt for acquisitions...
...At the same time, however, HSBC is largely throwing in the towel on the 2003 purchase of Household International Inc., a $14 billion deal that saddled it with a U.S. subprime lender whose results have worsened amid the housing downturn. HSBC had already ceased originating new U.S. auto loans; now people familiar with the bank's plans say, it will stop providing personal loans, while continuing to offer credit cards. HSBC's move comes as U.S. banks are under pressure to lend more money to consumers and it also could signal that HSBC believes the turndown in the U.S. has a long way to go.
HSBC also plans to shutter some 800 branches that were part of a Household network, these people said.
AMERICAN GENERAL: This is AIG's consumer lending subsidiary. (Do I have to say anything else?)
WELLS FARGO, BANK of AMERICA, AMERICAN EXPRESS: It's all the same story. (Need I continue?)
Most of the channels to restore consumer credit back into the marketplace have simply evaporated over the past 12 months! So, exactly how are we going to restore credit on Main Street?
Details. Details. Details. But, why let a little thing like reality get in the way of our comments.
From [the front page of today's Washington Post]:
By Neil Irwin
Washington Post Staff Writer
Wednesday, March 4, 2009; Page A01
...A day after the markets hit crisis lows, the administration sought to restore calm. The Treasury Department and the Federal Reserve launched a long-awaited program to pump money into consumer lending. Aides, including the White House budget director, vowed that the president's spending plan would benefit the vast majority of working Americans. And officials in various public venues used soothing language in an effort to inspire hope.
"What I'm looking at is not the day-to-day gyrations of the stock market," said President Obama, speaking to reporters at the White House, "but the long-term ability for the United States and the entire world economy to regain its footing."
The nation is caught in a dangerous cycle in which an endless stream of grim news -- waves of layoff announcements, signs that banks are teetering financially and negative economic data -- has contributed to anxiety among American consumers and businesses. That, in turn, has caused further economic weakness. The White House now appears to be moving to arrest that cycle.
But words weren't enough to end the raft of bad news yesterday...
Bold type is diarist's emphasis.
Yes, words are certainly not enough.
When it comes to actually making a difference with small businesspeople and the U.S. consumer (I'm not talking about automotive and student loans, where other special programs are also addressing those problems; I'm talking about all of those empty stores and warehouses...and all of those foreclosures and unemployed people), the reality is that Wall Street doesn't give a damn how much money we throw at them to help Main Street; and Washington's quite clueless.
There's tremendously sad irony to the reality that we're calling this: "TALF." It's being done wrong. It's downright ass-backwards. And, "TALF," spelled backwards is: FLAT.