The Federal Reserve Board announced Tuesday it is prepared to increase its Term Asset-Backed Securities Loan Facility (TALF) to as much as $1 trillion, in an effort to provide additional assistance to financial markets and institutions in meeting the credit needs of households and businesses. The expansion could broaden eligible collateral to include other types of highly-rated asset-backed debt such as commercial real estate and certain types of residential mortgage-backed securities, according to the Fed’s statement. An expansion of the TALF would be supported by additional funds from the Troubled Asset Relief Program. “If the program works as planned, it should help to restart activity in these key securitization markets and lead to lower borrowing rates and improved access in the markets for consumer and small business credit,” said Federal Reserve Chairman Ben Bernanke, in a prepared testimony to the House Financial Services Committee Tuesday. Bernanke said capital provided by the Treasury Department for the TALF under the Troubled Asset Relief Program “will help insulate the Federal Reserve from credit losses.” In his speech, Bernanke also told lawmakers that the Fed is looking to make details of its lending programs more transparent to the public — a task which has been assigned to Vice Chairman Donald Kohn. He urged lawmakers to devote special attention to a plan that would help resolve the potential failure of systematically important financial firms.  All the while, he supported the central bank’s efforts thus far to unfreeze credit markets and reduce private-sector borrowing. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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