Groups call on Treasury Secretary to restrict the use of bailout funds for credit cards
January 29, 2009
Treasury Secretary Timothy Geithner
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D,C, 20220
Re: New liquidity program for non-mortgage debt should not support any consumer
credit card debt which fails to meet standards for fair terms for individuals and families
Dear Secretary Geithner,
Consumer groups, faith based groups, civil rights organizations, labor unions, and community organizations write to request an important change to the taxpayerbacked credit program which is being launched in February 2009 to encourage the purchase of securitized credit cord debt We urge you to require that any securitized debt whose purchase is financed through this program meet standards for fairness and truthfulness, including those standards which were finalized in December 2008 by the Federal Reserve Board. We seek this change to ensure that any consumer credit card debt facilitated through this taxpayer-backed program will promote, rather than
damage, household economic stability, The program is the Terrn Asset Backed Securities Loan Facility (TALF). As we understand it, the TALF will use the Federal Reserve Board’s credit facility power, be operated by the Federal Reserve Bank of New York, and include a special purpose vehicle which is capitalized with $20 billion in credit protection by the U,S. Treasury from TARP funds.
The $20 billion in taxpayer funds is anticipated to support a program for up to $200 billion in non-recourse loans to buyers of securities backed by non-mortgage debt, including consumer credit card debt. In other words, buyers of credit card securitizations will be able to borrow funds from the Federal Reserve Bank of New York to purchase these securitizations, with repayment from revenues from the securitized credit card debts. The U.S. taxpayer will be supporting the program by picking up losses through a subordinated loan of $20 billion in TARP funds.
For the full letter, click here (PDF format).