Financial Update (Second Quarter 2009)

Recent Federal Reserve Actions Include Expansion of Loan Program, Release of Banks' "Stress Test" Results

photo of Fed board of governors imagesThe Fed recently broadened a program intended to stimulate bank lending and released the results of recent Supervisory Capital Assessment Program (SCAP) stress tests of the financial conditions of the 19 largest U.S. bank holding companies.

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

  • In another change to the TALF, the Fed announced that, starting in July, CMBS issued before Jan. 1, 2009, will become eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF). The purpose behind the expansion is to restart the market for legacy securities and, by doing so, stimulate the extension of new credit by helping to ease balance sheet pressures on banks and other institutions.
    Information about the TALF expansion for legacy CMBS off-site image
    FAQs about CMBS off-site image
    Information about the TALF expansion for CMBS and securities off-site image
    Statement by Fed Chairman Bernanke on SCAP off-site image
    Overview of results of SCAP off-site image

  • The results of a comprehensive assessment of the financial condition of the nation's 19 largest bank holding companies (BHCs) by federal bank supervisory agencies have been released. The SCAP—jointly conducted by the Federal Reserve, the Office of the Comptroller of theCurrency, and the Federal Deposit Insurance Corporation—was conducted so that bank supervisors could determine the capital buffers sufficient for the 19 BHCs to withstand losses and sustain lending even if the economic downturn became more severe than anticipated.



May 28 , 2009