Comments on: A few words from a reader on TALF mechanics http://www.creditwritedowns.com/2009/02/a-few-words-from-a-reader-on-talf-mechanics.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Terry http://www.creditwritedowns.com/2009/02/a-few-words-from-a-reader-on-talf-mechanics.html#comment-4150 Terry Sat, 28 Feb 2009 14:48:27 +0000 http://www.creditwritedowns.com/?p=6475#comment-4150 OK, I'm sitting in a bank with a lot of toxic assets from pre-2009. I re-package those assets in a new ABS and have one of the rating agency lapdogs call it "AAA." I can't sell it in the private market (& I really didn't expect to), so I take a 15% haircut as collateral to the FED and get real capital in return, and a 15% haircut is better than a 100% scalping. Why wouldn't that meet the FED's criteria of ABS issued in 2009? OK, I’m sitting in a bank with a lot of toxic assets from pre-2009. I re-package those assets in a new ABS and have one of the rating agency lapdogs call it “AAA.” I can’t sell it in the private market (& I really didn’t expect to), so I take a 15% haircut as collateral to the FED and get real capital in return, and a 15% haircut is better than a 100% scalping.

Why wouldn’t that meet the FED’s criteria of ABS issued in 2009?

]]> By: David Pearson http://www.creditwritedowns.com/2009/02/a-few-words-from-a-reader-on-talf-mechanics.html#comment-4138 David Pearson Fri, 27 Feb 2009 17:46:15 +0000 http://www.creditwritedowns.com/?p=6475#comment-4138 Ed, I hear you saying that the new issuance will have much more prudent underwriting. However, is this still true given the Fed's massive demand? In other words, say there's not enough product to feed the TALF under current auto loan underwriting standards. So what should the originator/issuer do? Relax the standards, as long as they are not required to keep part of the securitization on balance sheet. The reason I ask is that, back in the old subprime days, underwriting standards were a function of ABS demand. If the bankers asked for more product, you just moved the underwriting needle to deliver it to them. Isn't the whole point of TALF to go back to those good ol' days? Ed,

I hear you saying that the new issuance will have much more prudent underwriting. However, is this still true given the Fed’s massive demand? In other words, say there’s not enough product to feed the TALF under current auto loan underwriting standards. So what should the originator/issuer do? Relax the standards, as long as they are not required to keep part of the securitization on balance sheet.

The reason I ask is that, back in the old subprime days, underwriting standards were a function of ABS demand. If the bankers asked for more product, you just moved the underwriting needle to deliver it to them. Isn’t the whole point of TALF to go back to those good ol’ days?

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