Academic

The Fed Never Does Notice And Comment

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

In expanding the TALF yesterday (that's one of the program through which the Fed loan banks money in exchange for unsaleable assets, the Fed said:

The Federal Reserve Board on Friday announced that, starting in June, commercial mortgage-backed securities (CMBS) and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF).

The CMBS market came to a standstill in mid-2008. The inclusion of CMBS as eligible collateral for TALF loans will help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans, and facilitate the sale of distressed properties. CMBS accounted for almost half of new commercial mortgage originations in 2007. 

More than 1.5 million insurance premium finance loans are extended to small businesses each year so they can obtain property and casualty insurance. The loans are often funded through the asset-backed securities (ABS) market and have become more expensive and more difficult to obtain since the shutdown of that market last fall. The inclusion of insurance premium ABS as TALF-eligible collateral will facilitate the flow of credit to small businesses.

Why doesn't the Fed ever go through notice and comment for its initiatives during the financial crisis?  It could be the emergency nature of the action, which can be discerned, in part, from the emergency part of the Federal Reserve Act used to justify the program:

Full post as published by Conglomerate on May 02, 2009 (boomark / email).