Monthly Report on Credit and Liquidity Programs
and the Balance Sheet

Lending Facilities to Support Overall Market Liquidity

Lending to Depository Institutions

Recent Developments

• The Federal Reserve is in the process of winding down its Term Auction Facility (TAF). The amount of 28-day credit offered on February 8, 2010, was reduced to $50 billion, and a final auction of $25 billion in 28-day credit will be held on March 8, 2010. Credit provided to depository institutions through the discount window and the TAF has continued to decline, primarily reflecting reductions in loans outstanding under the TAF.
• TAF auctions have been undersubscribed since the October 5, 2008, auction. Since then, the auction rate has been equal to the minimum bid rate.
• On February 18, 2010, the Federal Reserve announced three changes to its lending programs for depository institutions. First, the Board approved an increase in the primary credit rate from 1/2 percent to 3/4 percent, effective February 19, 2010. Second, the Board announced that, effective March 18, 2010, the typical maximum maturity of primary credit loans would be shortened to overnight. These changes represent further normalization of the Federal Reserve's lending facilities and do not signal any change in the outlook for monetary policy. Finally, the Board announced that the minimum bid rate for the final TAF auction on March 8, 2010, had been raised by 1/4 percentage point to 1/2 percent.
• As indicated in table 6, total collateral pledged by depository institutions with discount window loans outstanding on January 27, 2010, was $168 billion, about three times the amount of credit outstanding.

Background

The discount window helps to relieve liquidity strains for individual depository institutions and for the banking system as a whole by providing a source of funding in times of need. Much of the statutory framework that governs lending to depository institutions is contained in Section 10B of the Federal Reserve Act, as amended. The general policies that govern discount window lending are set forth in the Federal Reserve Board's Regulation A.

Table 4. Discount Window Credit Outstanding to Depository Institutions
Daily average borrowing for each class of borrower over four weeks ending January 27, 2010

Depository institutions have, since 2003, had access to three types of discount window credit--primary credit, secondary credit, and seasonal credit. Primary credit is available to depository institutions in generally sound financial condition with few administrative requirements. Secondary credit may be provided to depository institutions that do not qualify for primary credit, subject to review by the lending Reserve Bank. Seasonal credit provides short-term funds to smaller depository institutions that experience regular seasonal swings in loans and deposits.

Table 5. Concentration of Discount Window Credit Outstanding to Depository Institutions
For four weeks ending January 27, 2010

On August 17, 2007, in order to promote orderly market functioning, the Federal Reserve began to allow the provision of primary credit for terms as long as 30 days. On March 16, 2008, the Federal Reserve increased the maximum maturity of primary credit loans to 90 days. On November 17, 2009, in response to improved financial conditions, the Federal Reserve announced that the maximum maturity on primary credit loans would be reduced to 28 days effective January 14, 2010.

In December 2007, the Federal Reserve introduced the TAF, which provides credit through an auction mechanism to depository institutions in generally sound financial condition. All regular discount window loans and TAF loans must be fully collateralized to the satisfaction of the lending Reserve Bank, with an appropriate "haircut" applied to the value of the collateral.

On September 24, 2009, the Federal Reserve announced that the TAF would be scaled back in response to continued improvements in financial market conditions. The auction amount for the 84-day auctions was reduced to $50 billion in October 2009 and to $25 billion in November 2009. In addition, the maturity dates of the 84-day auctions were adjusted over time to align with the maturity dates of the 28-day auctions. As of the January 11, 2010, TAF auction, the transition to a single 28-day auction cycle was completed. The final auction of $25 billion in 28-day credit will be held on March 8, 2010.

In extending credit to depository institutions, the Federal Reserve closely monitors the financial condition of borrowers. Monitoring the financial condition of depository institutions is a four-step process designed to minimize the risk of loss to the Federal Reserve posed by weak or failing depository institutions. The first step is monitoring, on an ongoing basis, the safety and soundness of all depository institutions that access or may access the discount window and the payment services provided by the Federal Reserve. The second step is identifying institutions whose condition, characteristics, or affiliation would present higher-than-acceptable risk to the Federal Reserve in the absence of controls on their access to Federal Reserve lending facilities and other Federal Reserve services. The third step is communicating--to staff within the Federal Reserve System and to other supervisory agencies, if and when necessary--relevant information about those institutions identified as posing higher risk. The fourth step is implementing appropriate measures to mitigate the risks posed by such entities.

Table 6. Lendable Value of Collateral Pledged by Borrowing Depository Institutions
Billions of dollars, as of January 27, 2010

At the heart of the condition monitoring process is an internal rating system that provides a framework for identifying institutions that may pose undue risks to the Federal Reserve. The rating system relies mostly on information from each institution's primary supervisor, including CAMELS ratings, to identify potentially problematic institutions and classify them according to the severity of the risk they pose to the Federal Reserve.¹ Having identified institutions that pose a higher risk, the Federal Reserve then puts in place a standard set of risk controls that become increasingly stringent as the risk posed by an institution grows; individual Reserve Banks may implement additional risk controls to further mitigate risk if they deem it necessary.

Collateral

All extensions of discount window credit by the Federal Reserve must be secured to the satisfaction of the lending Reserve Bank by "acceptable collateral." Assets accepted as collateral are assigned a lendable value deemed appropriate by the Reserve Bank; lendable value is determined as the market price of the asset, less a haircut. When a market price is not available, a haircut may be applied to the outstanding balance or a valuation based on an asset's cash flow. Haircuts reflect credit risk and, for traded assets, the historical volatility of the asset's price and the liquidity of the market in which the asset is traded; the Federal Reserve's haircuts are generally in line with typical market practice. The Federal Reserve applies larger haircuts, and thus assigns lower lendable values, to assets for which no market price is available relative to comparable assets for which a market price is available. A borrower may be required to pledge additional collateral if its financial condition weakens. Collateral is pledged under the terms and conditions specified in the Federal Reserve Banks' standard lending agreement, Operating Circular No. 10 (www.frbservices.org/files/regulations/pdf/operating_circular_10.pdf).

Table 7. Lendable Value of Securities Pledged by Depository Institutions by Rating
Billions of dollars, as of January 27, 2010

Discount window loans and extensions of credit through the TAF are made with recourse to the borrower beyond the pledged collateral. Nonetheless, collateral plays an important role in mitigating the credit risk associated with these extensions of credit. The Federal Reserve generally accepts as collateral for discount window loans and TAF credit any assets that meet regulatory standards for sound asset quality. This category of assets includes most performing loans and most investment-grade securities, although for some types of securities (including commercial mortgage-backed securities, collateralized debt obligations, collateralized loan obligations, and certain non-dollar-denominated foreign securities) only AAA-rated securities are accepted. An institution may not pledge as collateral any instruments that the institution or its affiliates have issued. Additional collateral is required for discount window and TAF loans with remaining maturity of more than 28 days--for these loans, borrowing only up to 75 percent of available collateral is permitted. To ensure that they can borrow from the Federal Reserve should the need arise, many depository institutions that do not have an outstanding discount window or TAF loan nevertheless routinely pledge collateral.

Changes to the lending margins on discount window collateral took effect on October 19, 2009. The Federal Reserve periodically reviews its collateral valuation practices, and the new collateral margins reflect the results of a broad-based review, which began before the current financial crisis, of methodology and data sources. For more information on these changes to collateral margins, refer to the Discount Window and Payments System Risk public website (www.frbdiscountwindow.org).

As shown in table 8, most depository institutions that borrow from the Federal Reserve maintain collateral well in excess of their current borrowing levels.

Table 8. Discount Window Credit Outstanding to Depository Institutions--Percent of Collateral Used
As of January 27, 2010

Lending to Primary Dealers

Recent Developments

• As previously announced, the Federal Reserve closed the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) on February 1, 2010. All loans extended under these facilities were repaid in full, with interest, in accordance with the terms of the facility.
• There had been no borrowing at the PDCF since mid-May 2009.
• Since mid-August 2009, borrowing from the TSLF had remained unchanged at zero.

Background

On March 16, 2008, the Federal Reserve announced the creation of the PDCF, an overnight loan facility that provided funding to primary dealers and helped foster improved conditions in financial markets more generally. All credit provided under the PDCF was fully secured by collateral with appropriate haircuts--that is, the value of the collateral exceeded the value of the loan extended. Initially, eligible collateral was restricted to investment-grade securities. On September 14, 2008, however, the set of eligible collateral was broadened to closely match the types of instruments that can be pledged in the tri-party repurchase agreement systems of the two major clearing banks. On September 21, 2008, and November 23, 2008, the Federal Reserve Board authorized the extension of credit to a set of other securities dealers on terms very similar to the PDCF.

Table 9. Credit Outstanding to Primary Dealers
As of January 27, 2010

On March 11, 2008, the Federal Reserve announced the creation of the TSLF. Under the TSLF, the Federal Reserve Bank of New York (FRBNY) lent Treasury securities to primary dealers for 28 days against eligible collateral in two types of auctions. For so-called "Schedule 1" auctions, the eligible collateral consisted of Treasury securities, agency securities, and agency-guaranteed mortgage-backed securities (MBS). For "Schedule 2" auctions, the eligible collateral included Schedule 1 collateral plus highly rated private securities. In mid-2008, the Federal Reserve introduced the Term Securities Lending Facility Options Program (TOP), which offered options to primary dealers to draw upon short-term, fixed-rate TSLF loans from the System Open Market Account (SOMA) portfolio in exchange for program-eligible collateral. The TOP was intended to enhance the effectiveness of the TSLF by offering added liquidity over periods of heightened collateral market pressures, such as quarter-end dates.

TSLF Schedule 1 and TOP auctions were suspended effective July 2009 in light of considerably lower use of the facility. Furthermore, in September 2009 the Federal Reserve announced its intention to scale back the size of TSLF auctions held between October 2009 and January 2010. The size of TSLF auctions was reduced to $50 billion in October 2009 and $25 billion in November 2009; offering amounts remained at $25 billion in December 2009 and January 2010. The January 7, 2010, TSLF Schedule 2 auction was the last auction conducted prior to the closure of the TSLF on February 1, 2010.

Table 10. Concentration of Borrowing at the PDCF and TSLF
As of January 27, 2010

The TSLF supported the liquidity of primary dealers and was designed to foster improved conditions in financial markets more generally.

In addition to the TSLF and TOP, the Federal Reserve has long operated an overnight securities lending facility as a vehicle to address market pressures for specific Treasury securities. Since July 9, 2009, this facility has lent housing-related government-sponsored enterprise (GSE) securities that are particularly sought after. Amounts outstanding under that program are reported in table 1A of the H.4.1 statistical release.

Collateral

Eligible collateral for loans extended through the PDCF included all assets eligible for tri-party repurchase agreement arrangements through the major clearing banks as of September 12, 2008. The amount of PDCF credit extended to any dealer could not exceed the lendable value of eligible collateral that the dealer provided to the FRBNY. The collateral was valued by the clearing banks; values were based on prices reported by a number of private-sector pricing services widely used by market participants. Loans extended under the PDCF were made with recourse beyond the collateral to the primary dealer entity itself. Breakdowns of PDCF collateral by asset type and credit rating are shown in tables 11 and 12, respectively.

Table 11. PDCF Collateral by Type
Billions of dollars, as of January 27, 2010

Table 12. PDCF Collateral by Rating
Billions of dollars, as of January 27, 2010

Transactions under the TSLF involved lending securities rather than cash: a dealer borrowed Treasury securities from the Federal Reserve and provided another security as collateral. Eligible collateral was determined by the Federal Reserve. Two schedules of collateral were defined. Schedule 1 collateral consisted of Treasury, agency, and agency-guaranteed MBS. Schedule 2 collateral included investment-grade corporate, municipal, mortgage-backed, and asset-backed securities, as well as Schedule 1 collateral. Haircuts on posted collateral were determined by the FRBNY using methods consistent with current market practices. Breakdowns of TSLF collateral by asset type and credit rating are shown in tables 13 and 14, respectively.

Table 13. TSLF Collateral by Type
Billions of dollars, as of January 27, 2010

Table 14. TSLF Collateral by Rating
Billions of dollars, as of January 27, 2010

Commercial Paper Funding Facility (CPFF)

Recent Developments

• As previously announced, the Federal Reserve closed the CPFF on February 1, 2010. CPFF LLC will retain its existing commercial paper holdings to maturity, and the LLC's other assets will remain until the LLC is dissolved.

Background

The CPFF, which was authorized under Section 13(3) of the Federal Reserve Act, was designed to support liquidity in the commercial paper markets. The CPFF provided a liquidity backstop to U.S. issuers of commercial paper through a specially created limited liability company (LLC) called CPFF LLC. This LLC purchased three-month unsecured and asset-backed commercial paper directly from eligible issuers. The FRBNY provides financing to the LLC, and the FRBNY's loan to the LLC is secured by all of the assets of the LLC, including those purchased with the accumulated upfront fees paid by the issuers. Breakdowns of commercial paper held in CPFF LLC, by type and credit rating, are shown in tables 16 and 17, respectively.

Table 15. Concentration of CPFF Issuers
For the four weeks ending January 27, 2010

Table 16. CPFF Commercial Paper Holdings by Type
Billions of dollars, as of January 27, 2010

Table 17. CPFF Commercial Paper Holdings by Rating
Billions of dollars, as of January 27, 2010

The CPFF was announced on October 7, 2008, and purchases of commercial paper began on October 27, 2008. This program is administered by the FRBNY, and the assets and liabilities of the LLC are consolidated onto the balance sheet of the FRBNY. The net assets of the LLC are shown in tables 1, 10, and 11 of the weekly H.4.1 statistical release, and primary accounts of the LLC are presented in table 7 of the H.4.1 statistical release. As previously announced, the CPFF was closed on February 1, 2010.

Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)

Recent Developments

• As previously announced, the Federal Reserve closed the AMLF on February 1, 2010. All loans made under the facility were repaid in full, with interest, in accordance with the terms of the facility.
• Credit outstanding under the AMLF had been zero since October 13, 2009.

Background

The AMLF was a lending facility that financed the purchase of high-quality asset-backed commercial paper from money market mutual funds (MMMFs) by U.S. depository institutions and bank holding companies. The program was intended to assist money funds that held such paper in meeting the demand for redemptions by investors and to foster liquidity in the asset-backed commercial paper (ABCP) market and money markets more generally. The loans extended through the AMLF were non-recourse loans; as a result, the Federal Reserve had rights to only the collateral securing the loan if the borrower elected not to repay. To help ensure that the AMLF was used for its intended purpose of providing a temporary liquidity backstop to MMMFs, the Federal Reserve established a redemption threshold for use of the facility. Under this requirement, a MMMF must have experienced material outflows--defined as at least five percent of net assets in a single day or at least 10 percent of net assets within the prior five business days--before the ABCP that it sold was eligible collateral for AMLF loans to depository institutions and bank holding companies. Any eligible ABCP purchased from a MMMF that had experienced redemptions at these thresholds could have been pledged to the AMLF at any time within the five business days following the date that the threshold level of redemptions was reached.

The creation of the AMLF, announced on September 19, 2008, relied on authority under Section 13(3) of the Federal Reserve Act. It was administered by the Federal Reserve Bank of Boston, which was authorized to make AMLF loans to eligible borrowers in all 12 Federal Reserve Districts.

The AMLF was closed on February 1, 2010. Since May 8, 2009, there had been no new borrowing through the AMLF, and as of October 13, 2009, all prior outstanding AMLF credit had matured.

Table 18. AMLF: Number of Borrowers and Amount Outstanding
Daily average for four weeks ending January 27, 2010

Collateral

Collateral eligible for the AMLF was limited to ABCP that:

• was purchased by the borrower on or after September 19, 2008, from a registered investment company that held itself out as a MMMF and had experienced recent material outflows;
• was purchased by the borrower at the mutual fund's acquisition cost as adjusted for amortization of premium or accretion of discount on the ABCP through the date of its purchase by the borrower;
• was not rated lower than A-1, P-1, or F1 at the time it was pledged to the Federal Reserve Bank of Boston (this would exclude paper that is rated A-1/P-1/F1 but was on watch for downgrade by any major rating agency);
• was issued by an entity organized under the laws of the United States or a political subdivision thereof under a program that was in existence on September 18, 2008; and
• had a stated maturity that did not exceed 120 days if the borrower is a bank, or 270 days if the borrower is a non-bank.

The qualifying ABCP was transferred to the Federal Reserve Bank of Boston's restricted account at the Depository Trust Company before an advance, collateralized by that ABCP, was approved. The collateral was valued at the amortized cost (as defined in the Letter of Agreement) of the eligible ABCP pledged to secure an advance. Advances made under the facility were made without recourse, provided the requirements in the Letter of Agreement were met. A breakdown of AMLF collateral by credit rating is shown in table 19.

Table 19. AMLF Collateral by Rating
Billions of dollars, as of January 27, 2010

Term Asset-Backed Securities Loan Facility (TALF)

Recent Developments

• The January 2010 non-commercial mortgage-backed securities TALF subscription supported the primary issuance of one asset-backed securities (ABS) deal worth about $1.5 billion, of which approximately $0.5 billion was financed through the TALF. Approximately $0.6 billion in loans was also extended against previously issued TALF-eligible ABS collateral.

Background

On November 25, 2008, the Federal Reserve announced the creation of the TALF under the authority of Section 13(3) of the Federal Reserve Act. The TALF is a funding facility under which the FRBNY extends credit with a term of up to five years to holders of eligible ABS. The TALF is intended to assist financial markets in accommodating the credit needs of consumers and businesses of all sizes by facilitating the issuance of ABS collateralized by a variety of consumer and business loans; it is also intended to improve market conditions for ABS more generally.

Table 20. TALF: Number of Borrowers and Loans Outstanding
As of January 27, 2010

Eligible collateral initially included U.S. dollar-denominated ABS that (1) are backed by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA) and (2) have a credit rating in the highest investment-grade rating category from two or more eligible nationally recognized statistical rating organizations (NRSROs) and do not have a credit rating below the highest investment-grade rating category from an eligible NRSRO. The loans provided through the TALF are non-recourse, meaning that the obligation of the borrower can be discharged by surrendering the collateral to the FRBNY. Borrowers commit their own risk capital in the form of haircuts against the collateral, which serve as the borrower's equity in the transaction and act as a buffer to absorb any decline in the collateral's value in the event the loan is not repaid. The U.S. Treasury is providing protection against losses of up to $20 billion to the FRBNY using funds authorized under the Troubled Assets Relief Program (TARP) of the Emergency Economic Stabilization Act of 2008.

On February 10, 2009, the Federal Reserve Board announced that it would consider expanding the size of the TALF to as much as $1 trillion and potentially broaden the eligible collateral to encompass other types of newly issued AAA-rated ABS, such as ABS backed by commercial mortgages or private-label (non-agency) ABS backed by residential mortgages. Any expansion of the TALF would be supported by the Treasury's providing additional funds from the TARP. As of January 27, 2010, however, the authorized limit for the program remained at $200 billion.

Between March and May 2009, the Federal Reserve expanded the range of eligible collateral for TALF loans to include:

• ABS backed by loans or leases related to business equipment, leases of vehicle fleets, floorplan loans, mortgage servicing advances, and insurance premium finance loans; and
• newly issued commercial mortgage-backed securities (CMBS) and certain high-quality CMBS issued before January 1, 2009 (so-called "legacy" CMBS).

High-quality newly issued and legacy CMBS must have at least two AAA ratings from a list of eligible NRSROs--DBRS, Inc.; Fitch Ratings; Moody's Investors Service; Realpoint; or Standard & Poor's--and must not have a rating below AAA from any of these rating agencies.

The Federal Reserve also authorized TALF loans with maturities of five years, available for the June 2009 funding, to finance purchases of CMBS, ABS backed by student loans, and ABS backed by loans guaranteed by the SBA. The Federal Reserve indicated that up to $100 billion of TALF loans could have five-year maturities and that some of the interest on collateral financed with a five-year loan may be diverted toward an accelerated repayment of the loan, especially in the fourth and fifth years.

On September 1, 2009, the following four non-primary dealer broker-dealers were named as agents for the TALF: CastleOak Securities, LP; Loop Capital Markets, LLC; Wells Fargo Securities, LLC; and The Williams Capital Group, LP. These agents, like the primary dealers, may represent borrowers in accessing the facility.

On October 5, 2009, the Federal Reserve announced two changes to the procedures for evaluating ABS pledged to the TALF. The first change was to propose a rule that would establish criteria for the FRBNY to use when determining which NRSROs' ratings are accepted for establishing the eligibility of ABS to be pledged as collateral to the TALF. The Board's rule regarding NRSROs does not apply to discount window lending or to other extensions of credit provided by the Federal Reserve System. The rule establishing the process for approving NRSROs was finalized on December 4, 2009. The second change required the FRBNY to conduct a formal risk assessment of all proposed collateral in addition to continuing to require that collateral for TALF loans receive two AAA ratings from TALF-eligible NRSROs. These changes were intended to promote competition among credit rating agencies, ensure appropriate protection against credit risk for the U.S. taxpayer, and ensure that TALF collateral continues to comply with the existing high standards for credit quality, transparency, and simplicity of structure.

In accordance with the Board's rule, the FRBNY announced that the credit ratings of four NRSROs--DBRS, Inc.; Fitch Ratings; Moody's Investors Service; and Standard & Poor's--would be accepted for establishing the eligibility of selected types of non-mortgage-backed ABS as collateral for the TALF. These NRSROs' ratings were accepted beginning with the TALF's February 2010 non-mortgage-backed ABS subscription.

The Federal Reserve Board initially authorized the offering of new TALF loans through December 31, 2009, but subsequently authorized an extension of the program until March 31, 2010, for loans against newly issued ABS and legacy CMBS, and until June 30, 2010, for loans against newly issued CMBS.

Collateral and Risk Management

Under the TALF, the FRBNY lends on a non-recourse basis to holders of certain ABS backed by consumer, business, and commercial mortgage loans. Eligible collateral for the TALF includes U.S. dollar-denominated ABS that (1) have a credit rating in the highest long-term or, in the case of non-mortgage-backed ABS, the highest short-term investment-grade rating category (for example, AAA) from at least two eligible NRSROs and (2) do not have a credit rating below the highest investment-grade rating category from an eligible NRSRO. Eligible small-business-loan ABS also include U.S. dollar-denominated cash ABS for which all of the underlying credit exposures are fully guaranteed as to principal and interest by the full faith and credit of the U.S. government. All or substantially all of the credit exposures underlying eligible ABS must be exposures to U.S.-domiciled obligors or with respect to real property located in the United States or its territories. The underlying credit exposures of eligible ABS must be student loans, auto loans, credit card loans, loans or leases relating to business equipment, leases of vehicle fleets, floorplan loans, mortgage servicing advances, insurance premium finance loans, commercial mortgages, or loans guaranteed by the SBA. Except for ABS for which the underlying credit exposures are SBA-guaranteed loans, eligible newly issued ABS must be issued on or after January 1, 2009. Eligible legacy CMBS must be issued before January 1, 2009, must be senior in payment priority to all other interests in the underlying pool of commercial mortgages, and must meet certain other criteria designed to protect the Federal Reserve and the Treasury from credit risk. In almost all cases, eligible collateral for a particular borrower must not be backed by loans originated or securitized by the borrower or by an affiliate of the borrower.

Table 21A. Issuers of Non-CMBS that Collateralize Outstanding TALF Loans
As of January 27, 2010

Table 21B. Issuers of Newly Issued CMBS that Collateralize Outstanding TALF Loans
As of January 27, 2010

Table 21C. Issuers of Legacy CMBS that Collateralize Outstanding TALF Loans
As of January 27, 2010

The FRBNY's loan is secured by the ABS collateral, with the FRBNY lending an amount equal to the market value of the ABS, less a haircut. The lendable value of the ABS may be adjusted based on a risk assessment by the FRBNY. The Federal Reserve has set initial haircuts for each type of eligible collateral to reflect an assessment of the riskiness and maturity of the various types of eligible ABS. Breakdowns of TALF collateral by underlying loan type and credit rating are shown in tables 22 and 23, respectively.

Table 22. TALF Collateral by Underlying Loan Type
Billions of dollars, as of January 27, 2010

Table 23. TALF Collateral by Rating
Billions of dollars, as of January 27, 2010

TALF LLC, a limited liability company, was formed to purchase and manage any asset-backed securities that might be surrendered by a TALF borrower or otherwise claimed by the FRBNY in connection with its enforcement rights to the TALF collateral. TALF LLC has committed to purchase, for a fee, all such ABS at a price equal to the TALF loan, plus accrued but unpaid interest. Purchases of these securities are funded first through the fees received by TALF LLC and any interest TALF LLC has earned on its investments. In the event that such funding proves insufficient, the U.S. Treasury's Troubled Asset Relief Program (TARP) will provide additional subordinated debt funding to TALF LLC to finance up to $20 billion of asset purchases. Subsequently, the FRBNY will finance any additional purchases of securities by providing senior debt funding to TALF LLC. Thus, the TARP funds provide credit protection to FRBNY. Financial information on TALF LLC is reported weekly in tables 1, 2, 8, 10, and 11 of the H.4.1 statistical release. As of January 27, 2010, TALF LLC had purchased no assets from the FRBNY.

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