The move was announced today by Treasury Secretary Timothy Geithner as part of the government’s Financial Stability Plan.
The program’s structure is similar to a credit facility in which lenders can deposit newly issued, AAA-rated CMBS as collateral. The program has a capacity of up to $1 trillion, with funds lent by the Federal Reserve and backed by up to $100 billion from the Treasury. The Fed will announce the program’s launch date later this month.
The Fed will launch the program in two steps and CMBS will not be accepted in the first. The first step, scheduled for later this month, will operate based on TALF’s original guidelines and will be sized at $200 billion. The second launch, which will accept CMBS, should occur in subsequent weeks.
CMBS will share the facility with auto, small business, credit card and Small Business Administration-guaranteed small business loans. It may eventually be extended to include non-agency residential mortgage-backed securities and assets collateralized by corporate debt.
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