Fed's loan plan picks up pace

The flagship US programme to revive consumer and small business lending picked up pace in June, showing investors have grown more comfortable with taking part in the government initiative and appetite for risk has increased across all markets. The lending facility is a crucial part of the Federal Reserve's and Treasury's efforts to lower borrowing costs for consumers for everything from student loans to a new car, which had skyrocketed after credit markets froze last year. In June, investor demand for Fed loans rose to about $11.5 billion (Dh42.23bn), up 8 per cent from May and up 145 per cent from the first round in March. The Term Asset-Backed Securities Loan Facility (Talf) – announced with much fanfare in November – had some trouble getting out of the starting block in March and April. New York Fed President William Dudley said in April that the programme had initially suffered from some investors' worry that they could become subject to the same heated scrutiny on their pay as banks that received bailout money. Investors said they were also initially put off by complex paperwork. In March and April, "issues related to the Customer Agreement kept many participants on the sidelines. By May, many of the issues had been resolved," said Brian Loo, portfolio manager at Metropolitan West Asset Management in Los Angeles. He said the three-year, non-recourse funding offered by the Talf was attractive to investors. Some economists had feared the programme would not gain enough traction to be effective – a worry that has since been soothed. Investor interest was broader than in previous rounds, with loans for premium finance and servicing advances requested for the first time. But demand was still clustered around auto and credit card ABS, at the heart of the consumer lending problem. Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here .