DRAFT
Supplemental Income Generation
Opportunities Using the
Term Asset-Backed Securities Loan Facility (“TALF”)
March 3, 2009
Executive Summary
Consideration of using TALF to generate supplemental treasury returns
Subsidized leveraged limited liability investment in stranded consumer asset related ABS
Issues
Positives
• Limited downside given high quality assets
• Alternative returns high double digit ROE
• Intermediate Term 6 – 18 month
• Modest Investment
•Limited Mark to Market
Consideration
• Liquidity
• ALM
• More expensive than deposit funding (100 -125 BPs)
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Term Asset-Backed Securities Loan Facility Summary
Summary Information
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Facility
Structure
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First-Loss
Protection:
U.S. Treasury
Loan Terms
New York Federal Reserve (NY Fed) will make up to $1 trillion of non-recourse loans to Eligible
Borrowers, secured by Eligible ABS.
TALF will begin lending in March 2009 and continue through December 31, 2009, unless the program is
extended.
US Treasury will provide $20 billion of first-loss protection to NY Fed under the TALF in the event of
collateral default.
Borrowers will access TALF through Primary Dealers, who will act as agent and deliver Eligible ABS to
a Custodian Bank. (See Exhibit D for list of Primary Dealers).
All settlements have to clear through the Depository Trust Company (“DTC”).

NY Fed will establish an SPV that will purchase any Eligible ABS collateral the NY Fed receives if a
borrower under a TALF loan puts the collateral to the NY Fed in satisfaction of the loan.

US Treasury will provide the first $20 billion of funding to that SPV, in the form of a subordinated note
purchase.

NY Fed will make a senior loan to the SPV to fund any purchases of Eligible ABS above the $20 billion
provided by the US Treasury.

All cash flows on SPV assets will repay the NY Fed's senior loan first, and the US Treasury's
subordinated notes will absorb first losses on any ABS collateral owned by the SPV.
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Term Asset-Backed Securities Loan Facility Summary (cont’d)





Loan Terms






Loans offered on a fixed day each month.
 Eligible Borrowers may request one or more loans by indicating for each loan (a) Eligible ABS (prescreened for eligibility by Primary Dealer), (b) loan amount, and (c) fixed or floating interest rate.
 NY Fed reserves the right to accept/reject requests at its discretion and/or identify higher risk ABS for
additional scrutiny.
 Upon receipt of eligible collateral at the NY Fed’s Custodian Banks, loan proceeds are dispersed to the
Borrower.
3 year loan terms.
Eligible auto loan ABS and credit card ABS must have a maximum 5-year expected life.
NY Fed will require a 5 bps non-recourse loan fee at the inception of each loan transaction.
Borrower may elect either a fixed or floating (spread to LIBOR) interest rate for each loan requested.
 Interest rate set in advance of each monthly subscription date;
 Fixed interest rate at 3-year swap rate + 100 bps;
 Floating interest rate at 1-month LIBOR + 100 bps;
 Rate level to be set at a level to incent Borrowers to purchase newly issued Eligible ABS at yield
spreads that are both higher than normal market conditions but lower than spreads in highly illiquid
market conditions.
 Interest paid monthly.
All principal collections are required to apply towards repayment of principal of the related TALF loans (no
limit on prepayments), while excess interest passes through to the Borrower.
Maximum loan amount: market value of the Eligible ABS less a haircut (subject to additional restrictions
based on asset class).
Minimum Loan Amount: $10 million.
Collateral Haircuts will be determined by the NY Fed and announced monthly prior to each monthly loan
subscription date; the haircuts will vary by asset class, collateral composition, and ABS tenor. A set of
preliminary collateral haircuts can be found in Exhibit A. For comparative purposes, Exhibit B outlines Fed
discount window collateral haircuts. Please note that these may or may not be similar to the eventual
haircuts established for TALF.
No ongoing collateral MTM/Margining requirements.
Collateral Substitution is not allowed during the loan term.
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Term Asset-Backed Securities Loan Facility Summary (cont’d)

Loan Terms
(cont’d)
US$ denominated cash ABS backed by auto loans (includes retail and leases relating to cars, light trucks or
motorcycles and auto dealer floorplan loans), student loans (FFELP consolidation and nonconsolidation and
private student loans), credit cards (including corporate cards) or SBA loans (including loans guaranteed by
the government).
 May be expanded to include CMBS, non-Agency RMBS or other asset classes.
 All/substantially all of assets in pools must be new or recent originations to US-domiciled obligors.
 Collateral underlying ABS may NOT be originated by the Eligible Borrower or its affiliates.
 Collateral underlying ABS may NOT be itself cash or synthetic ABS.
 Except for SBA Pool Certificates or Development Company Participation Certificates, eligible ABS must
be issued on or after January 1, 2009.
Eligible ABS
 If auto loan ABS, auto loans must have been originated on or after October 1, 2007.
 If SBA loan ABS, SBA loans must have been originated on or after January 1, 2008.
 If student loan ABS, student loans must have a first disbursement date on or after May 1, 2007.


 If credit card ABS, must be for refinancing of existing credit card ABS maturing in 2009 and in
maximum size equal to maturing ABS.
ABS must be rated AAA/Aaa by at least two NRSROs(2) and may not have a rating below AAA/Aaa by any
major NRSRO.
Eligible ABS need not be issued on the same day of borrowing from TALF
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Term Asset-Backed Securities Loan Facility Summary (cont’d)

U.S. persons (including business organizations organized in the U.S.), including U.S. subsidiaries of
non-U.S. parent companies and U.S. branches/agencies of foreign banks.
Must have account relationship with a Primary Dealer.

Expected Borrowers/Investors:

Eligible
Borrowers
 Hedge Funds who often operate with leverage.
 Primary Dealers are expected to take-down securities for spread income.
Originator
Restrictions

Originators of securitized assets must agree to comply with executive compensation limits consistent
with TARP Capital Purchase Program executive compensation guidelines as outlined in the
Emergency Economic Stabilization Act of 2008.
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Preliminary Collateral Haircuts
Sector
Auto
Auto
Auto
Auto
Auto
Bank Card
Bank Card
Retail Card
Retail Card
Student Loan
Student Loan
Small Business

Subsector
Prime retail lease
Prime retail loan
Subprime retail loan
Floorplan
RV/motorcycle
Prime
Subprime
Prime
Subprime
Private
Gov’t guaranteed
SBA loans
0-1
10%
6%
9%
12%
7%
5%
6%
6%
7%
8%
5%
5%
1-2
11%
7%
10%
13%
8%
5%
7%
7%
8%
9%
5%
5%
ABS Expected Life (years)
2-3
3-4
4-5
12%
13%
14%
8%
9%
10%
11%
12%
13%
14%
15%
16%
9%
10%
11%
6%
7%
8%
8%
9%
10%
8%
9%
10%
9%
10%
11%
10%
11%
12%
5%
6%
7%
5%
5%
6%
5-6
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
13%
8%
7%
6-7
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
14%
9%
8%
For ABS with expected lives beyond seven years, haircuts will increase by 1% for each additional year of expected life beyond
seven years
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Fed Discount Window Collateral Haircuts
Collateral Category
Federal Reserve System
Discount and PSR Collateral Margins Table*
Effective: September 22, 2006
Changes can be viewed in the 'Change History' worksheet tab
Lendable Value for Securities or
Lendable Value for
Instruments with Market Prices /1
Securities or
(% of Market Value)
Instruments if
Duration Buckets
Market Price Not
Lendable
Lendable Value
Value for
for Loans Not
Loans
Individually
Individually
Deposited at
Deposited at
Available
FRS/8
FRS/7
(% of Par or
(% of Outstanding
(% of Market
Outstanding Balance)
Balance)
Value)
0 to 5
>5 to 10
>10
98%
98%
97%
95%
93%
90%
90%
97%
96%
96%
94%
92%
89%
85%
97%
92%
94%
95%
90%
97%
92%
97%
95%
90%
92%
92%
87%
95%
90%
95%
93%
85%
86%
88%
83%
90%
85%
90%
80%
Foreign Government Agencies - AAA - Foreign Denominated/2
92%
90%
85%
Municipal Bonds - US Dollar Denominated
Municipal Bonds - AAA - Foreign Denominated /2
Corporate Bonds -US Dollar Denominated
Corporate Bonds - AAA -Foreign Denominated /2
97%
90%
97%
92%
95%
85%
95%
90%
92%
80%
93%
85%
75%
German Jumbo Pfandbriefe - AAA - US Dollar Denominated
96%
92%
90%
60%
German Jumbo Pfandbriefe - AAA - Foreign Denominated/2
92%
90%
85%
U.S. Treasuries and Fully Guaranteed Agencies:
Bills, Notes, Bonds, Inflation Indexes
Zero Coupons, STRIPS
Government Sponsored Enterprises:
Bills, Notes, Bonds, Inflation Indexes
Zero Coupons, STRIPS
International Agencies:
Bills, Notes, Bonds - US Dollar Denominated
Bills, Notes, Bonds - AAA - Foreign Denominated /2
Zero Coupons, STRIPs
Brady Bonds- US Dollar Denominated
Brady Bonds - Foreign Denominated /2
Foreign Governments - US Dollar Denominated
Foreign Governments - Foreign Denominated /2
Foreign Government Agencies - US Dollar Denominated
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60%
75%
75%
80%
Fed Discount Window Collateral Haircuts
Asset-Backed Securities - AAA (includes Collateralized Loan
and Debt Obligations)
98%
96%
93%
85%
Asset-Backed Securities - non AAA (excludes Collateralized
Loan and Debt Obligations)
97%
95%
92%
80%
97%
95%
92%
80%
98%
96%
93%
90%
97%
95%
92%
80%
94%
92%
90%
90%
70%
Commercial Mortgage-Backed Securities - AAA
Mortgage Backed Securities (includes agency and private
label)
Collateralized Mortgage Obligations - AAA (includes agency
and private label)
Trust Preferred Securities
Mutual Funds (tcuux, tcudx, tcuxx) /5 /6
87%
Government Sponsored Enterprise Stock (FNMA, FHLM) /6
Bankers Acceptances, Certificates of Deposit, and
Commercial Paper
Commercial and Agricultural Loans:
Minimal Risk Rated /3
Normal Risk Rated /4
Agency Guaranteed Loans
Commercial Real Estate Loans
Construction Real Estate Loans
1-4 Family Residential Mortgages
Home Equity
Consumer Loans- Autos, Private Banking, Installment, Etc.
Consumer Loans- Credit Card Receivables, Student Loans
Consumer Loans - SubPrime Credit Card Receivables
97%
95%
90%
87%
93%
87%
87%
91%
89%
87%
* This document is for informational purposes only and subject to change without notice.
It is not binding on the Federal Reserve System in any particular transaction.
/1 New issues are valued at 90 percent of par value until they are priced by the Federal Reserve System's pricing vendor(s).
/2 Contact your local Reserve Bank for a list of the foreign denominations currently acceptable.
/3 Minimal Risk is defined as investment grade.
/4 Normal Risk is defined as below investment grade but still a "pass-credit" from a regulatory standpoint.
/5 Margin only for Credit Union Mutual Funds. Margin must be developed on a fund by fund basis.
/6 The duration buckets do not apply to the mutual fund or GSE stock margins.
/7 Pledged loan data received using electronic files formatted according to FRS's specifications (Automated
Loan Deposit - ALD) and certain loans held in FRS Vaults.
(Note: Information on Automated Loan Deposit (ALD) is available at www.FRBDiscountWindow.org/ald.cfm)
/8 Pledged loan data received using paper reports or electronic files in a format determined by pledging institution.
Source: http://www.frbdiscountwindow.org
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80%
75%
90%
75%
75%
85%
85%
80%
75%
60%
Indicative Returns
2-3 Year Auto Loans
2-3 Year Credit Card ABS
TALF Margin: 100 bps; Upfront Fee:
5 bps; Ppt: 1.7 ABS
Haircut
#####
150
200
250
300
350
400
450
500
550
6.00%
8.00%
9.00%
11.57%
21.17%
31.53%
42.69%
54.71%
67.64%
81.57%
96.54%
112.64%
9.36%
16.38%
23.80%
31.66%
39.97%
48.76%
58.05%
67.87%
78.24%
8.64%
14.82%
21.32%
28.15%
35.34%
42.90%
50.84%
59.18%
67.94%
Bond Spreads (bps)
Bond Spreads (bps)
TALF Margin: 100 bps; Upfront Fee: 5 bps
Haircut
10
37.4%
150
200
250
300
350
400
450
500
550
8.00%
11.00%
6.11%
9.26%
12.59%
16.12%
19.87%
23.86%
28.10%
32.61%
37.43%
5.31%
7.59%
9.97%
12.45%
15.04%
17.73%
20.55%
23.49%
26.57%
Primary Dealers
List of the Primary Government Securities Dealers Reporting to the Government Securities Dealers Statistics Unit of the
Federal Reserve Bank of New York:
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Primary
Dealers
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BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Dresdner Kleinwort Securities LLC
Goldman, Sachs & Co.
Greenwich Capital Markets, Inc.
HSBC Securities (USA) Inc.
J. P. Morgan Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
UBS Securities LLC.
Source: http://www.newyorkfed.org/markets/pridealers_current.html
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