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Fed Admits It Accepts Unworthy Collateral In TALF

Tyler Durden's picture

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Wed, 01/06/2010 - 11:02 | 184264 Cursive
Cursive's picture

Further proof that TARP was a "trojan horse" for the Bailout.  These other "short term" tools of the FRB are the major buttress to the banks.  TALF, TANF, etc. need to be killed, along with the FRB.

Wed, 01/06/2010 - 11:02 | 184265 ToNYC
ToNYC's picture

Hey, it's only fair to fund their retirement packages with the cash-flow of their no worries loan tranches..LOL..eating their own dogfood you might call it.

Wed, 01/06/2010 - 11:14 | 184282 trav7777
trav7777's picture

Well, golly gee...no way!

You mean it wasn't the good productive assets?

A lot of the trash marked at par on the banks' and Fed's books is actually trash that is of near-zero worth.  Anyone with a cursory understanding of how CDOs work gets that with the impairments we've seen in the underliers, that mezz and equity tranche paper is worthless.

I wonder if there are any "real" MBS or ABS pools left out there...certainly, nobody in their right mind is going to swap supersenior paying paper for a loan, what would be the point in that?

Wed, 01/06/2010 - 11:30 | 184298 Anonymous
Anonymous's picture

All I can say:Man,you are good and quick. And if you are realy one TD,then you don't sleep too....

Wed, 01/06/2010 - 11:37 | 184305 Oso
Oso's picture

treasuries just fell out of bed, curve steepened pretty quick.

Wed, 01/06/2010 - 12:09 | 184354 bugs_
bugs_'s picture

"recently identified and corrected a
methodological error"

sounds better than

"a bureaucratic snafu"

Wed, 01/06/2010 - 12:11 | 184358 Anonymous
Anonymous's picture

The FED Is like the ever loving all beneficent Father.

No collateral is ever truly unworthy.


Wed, 01/06/2010 - 12:41 | 184407 curbyourrisk
curbyourrisk's picture

"However, the New York Fed continues to expect no losses on the loans backed by this CMBS because the stress value is based on extremely unlikely economic circumstances, and because the market value of this CMBS is well above the TALF loan amounts."

You mean extremely unlikely economic circumstances like unemployment going over 8.8%???  Jack-asses....everyone of them!

Wed, 01/06/2010 - 12:53 | 184433 Yossarian
Yossarian's picture

So The Fed lent money using this CUSIP 059497AX5 as collateral.  How much did they lend- $3.1B?  What was the current loan value and how did they arrive at the figure?  Did they discount to the current loan value?  Who knows, if they loaned $2B against this collateral it may not have been a terrible deal.  

Wed, 01/06/2010 - 12:57 | 184439 Anonymous
Anonymous's picture

That Solana in Westlake has always been a ghost town. I cannot believe it has not bankrupted already?

Wed, 01/06/2010 - 13:11 | 184483 Anonymous
Anonymous's picture

Don't forget that there are similar questions over the ECB's collateral:



20 Nov 2009

"The bank “will require at least two ratings from an accepted external credit assessment institution for all” asset- backed securities issued from March 1, 2010, the Frankfurt-based central bank said today in an e-mailed statement. In January, the ECB said it required a rating from one credit assessor."

Wed, 01/06/2010 - 13:11 | 184484 Anonymous
Anonymous's picture

If I am not mistaken, the Fed and treasury conspired to put the truly worthless collateral in off-balance sheet super SIVS like Maiden Lane I, II and various other undisclosed SIVs (Enronomics) to give the appearance of solvency in order for treasury to issue a couple trillion in new debt.

Wed, 01/06/2010 - 15:44 | 184711 Anonymous
Anonymous's picture

The TARP was toxic assets put on the US Treasury (taxpayers). The TALF was AAA-rated assets that the privately-owned Fed gets.

Is this analysis right? How come nobody talks about it? People always lump them together, but nobody noticed that the Fed gets AAA, and the taxpayers get toxic? Is this analysis right? Thanks.

Wed, 01/06/2010 - 15:55 | 184730 Anonymous
Anonymous's picture

The TARP was toxic assets put on the US Treasury (taxpayers). The TALF was AAA-rated assets that the privately-owned Fed gets.

Is this analysis right? How come nobody talks about it? People always lump them together, but nobody noticed that the Fed gets AAA, and the taxpayers get toxic? Is this analysis right? Thanks.

Wed, 01/06/2010 - 17:03 | 184835 Hephasteus
Hephasteus's picture

Admitting these things have no value is not much of a confession. If they did then the diced up MBS's would  still be dumped on pension funds and other money pools all over the world.

Wed, 01/06/2010 - 17:53 | 184912 Green Sharts
Green Sharts's picture

By including worthless crap such as this

Back to the old "worthless crap" canard, Tyler?  By your own admission, close to 1/3 of the assets backing the security you reference have very strong interest coverage and 13% are delinquent or in special servicing.  The rest of the assets are making timely payments and apparently still have some margin for error.  If 33% of the assets are worth par, the 13% that are delinquent are worth $.50 on the dollar and the other 54% are worth $.75 on the dollar, the security is worth roughly $.80 on the dollar before you look at subordination.  If this is a senior tranche with junior securities below it that take the losses first, it might be worth $$.85-$.90 on the dollar.  If it was trading at $.70 on the dollar and the Fed valued it at that as collateral that price would allow for a lot of additional deterioration in performance.  

The value of a lot of RMBS and CMBS had big rallies in 2009 well before the PPIP ever started because they were priced down to catastrophic default and recovery assumptions.  Seth Klarman, a noted value investor with a great long-term record, was buying them.  Jeff Gundlach, who you seem to think is a pretty smart guy and who also has a great long-term track record, was buying private label RMBS (also worthless crap, right?) but not CMBS.

Is your position really that this security is literally worthless?

of course market value of CMBS classes will be above loan amounts.

What percentage of outstanding CMBS are trading above par?

Wed, 01/06/2010 - 22:33 | 185175 Dr. Richard Kimble
Dr. Richard Kimble's picture

A4 Tranche with current AAA rating from realpoint and the other rascals (moodys/S&P) plenty of subordination..definitely worse collateral out there...

Thu, 01/07/2010 - 01:34 | 185252 Anonymous
Anonymous's picture

I'm shocked! The Chairman just assured us via govTwits that all is fine:


"govTwits Daily Highlights"



Thu, 01/07/2010 - 01:40 | 185255 Tom North
Tom North's picture

I'm shocked! the Chairman just assued us via govTwits that all was fine:


"govTwits Daily Highlights"



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