Treasury Secretary Timothy Geithner has unveiled a sweeping plan to loosen up the still-tight credit markets. The plan, announced on Feb. 10, aims to restore lenders’ confidence and make it easier for small businesses, real estate firms and other potential borrowers to obtain loans. “Our plan will help restart the flow of credit, clean up and strengthen our banks and provide critical aid for homeowners and small business,” Geithner said.
A key component of the plan is expanding the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) from $200 billion to as much as $1 trillion.
The Fed launched TALF last fall to help households and small companies get credit through asset-based securities. Treasury’s new proposal would broaden TALF to include real estate securities.
The plan also would set up a public- private investment fund that would use public financing to leverage private capital, initially for a combined $500 billion, with the potential to rise to $1 trillion.
Describing the plan as “right on target,” Jeffrey DeBoer, the Real Estate Roundtable’s CEO, says, “Treasury is pursuing the right strategy now to help avoid a potential foreclosure disaster” in commercial real estate.
Ken Simonson, the Associated General Contractors’ chief economist, says only time will tell if the plan will succeed. The administration’s strategy has “a lot of elements with potential, but it is really going to be up to the bankers now and people with money in the banks to see if it gives them the confidence” to lend, he says.