TALF: Help Consumers, Businesses Hit by Foreclosed Homes

Time icon May 8th, 2009 by Autor Joseph Smith

The capability of federal government programs to help Americans recover from the devastating claws of foreclosed houses is not yet clear, according to Elizabeth Warren, chairperson of the Congressional Oversight Panel established to monitor the banking sector bailout and the implementation of the Troubled Assets Relief Program.

TALF help consumers hit by Foreclosures

Warren said that small businesses and families are facing obstacles to get credit to help them rise up from the crisis of foreclosed homes because government programs have not been effective in driving lending activities.

In a report from the panel, data was shown to describe the difficulties faced by small business enterprises in getting credit for their continued operations. With loan volumes falling, families needing credit are even more burdened as they struggle against the effects of foreclosed homes and tight credit.

The oversight panel studied the availability of loans for small business enterprises and consumers, including credit cards, student loans and auto loans. It also examined the Term Asset-Backed Lending Facility (TALF) program of the government, which was set up to stimulate loan markets to serve consumers and small businesses.

Warren insisted small business loans have not been made available through the TALF program. Small enterprises are surviving through credit cards, SBA loans and loans from community associations.

TALF was established to spur lending to consumers and small businesses through loan securitizations. These securitizations minimize the risks and costs of lenders because securitized loans are sold to investors.

According to the panel report, loan securitizations for the small business and consumer market were 80 percent below 2007 levels.

The five-member oversight panel was launched in 2008 to oversee TARP, which was set up to bail out financial companies and to help solve the flood of foreclosed homes that arose from the subprime crisis.

Warren, a Harvard law professor, has been openly criticizing the way the bailout has been administered, reiterating that the federal government need to be more strict with the banks and to show more transparency with its bailout handling.

However, Warren acknowledged there are many factors blocking efforts to increase lending to small businesses and consumers. She mentioned that the rising jobless rates and rate of foreclosed homes have forced consumers to minimize their use of credit cards. She also admitted that small businesses may have downsized their operations so they do not need additional credit.

In summary, the panel highlighted its concern about the capability of the TALF program to help consumers and small businesses survive the crisis largely caused by foreclosed homes.

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