COVID Response: The Term Asset-Backed Securities Loan Facility

Elizabeth Caviness, Ankur Goyal, Woojung Park and Asani Sarkar

No 979, Staff Reports from Federal Reserve Bank of New York

Abstract: The COVID-19 pandemic disrupted the asset-backed securities (ABS) market, resulting in higher spreads on ABS and briefly halting the issuance of some ABS. On March 23, 2020, the Federal Reserve established the Term Asset-Backed Securities Loan Facility (TALF) to support the flow of credit to consumers and businesses by re-enabling the issuance of ABS. In this paper, we describe how TALF works, how much it was used, and its effect on the issuance and spreads of TALF-eligible securities relative to those of TALF-ineligible securities. We find that both the introduction of TALF and its subsequent expansion were associated with statistically significant declines in the spreads of TALF-eligible relative to TALF-ineligible ABS. However, the facility did not have a statistically significant effect on issuance. Finally, we compare TALF with an earlier version of the facility that was implemented during the global financial crisis and discuss lessons learned from implementing the program.

Keywords: Term Asset-Backed Securities Loan Facility (TALF); COVID crisis; Fed facility; securitization; ABS market; Federal Reserve lending facilities; COVID-19 (search for similar items in EconPapers)
JEL-codes: G01 G18 G23 (search for similar items in EconPapers)
Pages: 27
Date: 2020-09-01
New Economics Papers: this item is included in nep-cba and nep-mac
Note: This paper was prepared for an upcoming issue of the Economic Policy Review and a related New York Fed conference, “Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic.”
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