Discover Financial Services said a forthcoming Federal Reserve Board program designed to revive issuance of ABS is "of very high interest" to it.
At a conference in New York last week, Roy Guthrie, the company's chief financial officer, said details on pricing and the amount of leverage offered are crucial to the success of the program, through which the Fed plans to lend up to $200 billion to investors to buy new and recently issued bonds backed by consumer and small-business loans.
But Guthrie said Discover hopes the planned Term Asset-Backed Securities Loan Facility (TALF) will "be as successful as" the recent Federal Deposit Insurance Corp. program to guarantee bank debt.
ABS issuance nearly came to a halt in late September, another casualty of the credit crunch. The Fed announced its so-called TALF program in November as a way to ease the flow of credit to consumers and small businesses and plans to launch it this month.
Discover has been ramping up its deposit platform, and Guthrie said the card lender and payment network company would have to weigh participation in the TALF against deposit funding, which he said is "incredibly cost-effective."
"It's highly likely," he said, "it could be that" Discover would not use all the TALF capacity available to it, relying on other funding sources instead.
