Critics can say what they want about TALF.
But, as clearly demonstrated by the articles in this month's ASR, the program is still the only game in town, at least for U.S. ABS.
Gabrielle Stein's article on auto ABS expresses optimism that new auto deal flow will hold despite the headline risk attached to Detroit's Big Three. So far, between the two rounds of TALF, five auto issuers have come to market.
TALF is not only fuelling auto ABS, but the country's entire ABS machinery. Although my article highlights numbers that show a substantial decline in subscriptions levels from TALF's first-to-second iterations, I also argue that thanks to the program, issuers and investors are active in the securitization market again. As Glenn Schultz from Wachovia Securities aptly points out: "If 46% of the market is TALF and spreads have come in, I will call that a success." The program, opponents charge, encourages leveraged buyers by giving them 18% returns on triple-A securities, making it impossible to price subordinate bonds. But that's exactly the point; TALF is only meant to provide liquidity to the top part of the capital structure.
European governments are also fond of TALF, according to Nora Colomer. Specifically, the U.K. government has worked on several TALF-like initiatives. However, they look different than the U.S.'s program. Instead, the U.K. has the Bank of England's Asset Purchase Facility, which targets issuers and not investors.
Another matter that European players are focused on is counterparty risk. Just last week Fitch Ratings extended the comment period for its structured finance counterparty criteria proposals, a move discussed by the agency's analysts in this issue. For her part, Nora argues that in the aftermath of the Lehman Brothers fiasco, market players must now figure out how to best isolate counterparty risk from structured finance deals.
In other parts of the world, the global financial turmoil has taken more victims hostage. Felipe Ossa describes how, after having borrowed heavily abroad and making gambles on local real estate, Kazakh banks are seeking debt workouts, putting pressure on outstanding DPR deals from three originators.
Aside from autos, credit card ABS has also faced intense scrutiny from regulators and the press. Two bills from both houses of Congress are targeting credit card reform. ABS credit card issuers are up in arms, stating that these reforms are killing their ability to price risk in real time, which, as my story highlights, is the essence of the credit card business.
And finally, in his column, Bill Berliner tackles one of the root causes of the industry's problems: the failure of effective risk management through models and analytics.
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