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Legacy CMBS TALF: Something New for Something Old

On May 19, 2009, the Board of Governors of the Federal Reserve System (FRB) and the Federal Reserve Bank of New York (FRBNY) announced that, starting in July, certain high quality commercial mortgage backed securities (CMBS) issued before January 1, 2009 (Legacy CMBS) will become eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF). Consistent with the FRBs steady roll-out of the TALF, this represents another step in refining and expanding what is deemed TALF-eligible collateral. The significance of this expansion, however, reflects a new phase for the TALF with the addition of a legacy asset class to the list of eligible TALF collateral. Arguably, it also signals a new policy direction in using the FRBs balance sheet to help clean up the so-called toxic assets as discussed later in this article, it is a policy direction with which the FRB may not be particularly comfortable.

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