The New York Fed is about to start handing out money to anyone smart/dumb/crazy enough to invest in the asset-backed securities market. The idea is that giving big investors money to buy securities backed by car loans, credit card repayments or small business loans will create a market for those ABS securities. If a market develops, credit card and auto loan writers will have incentive to write more loans because they'll be able to package them and sell them to investors. So, the money starts with the big investors (hedge funds, pension funds, etc.) and eventually trickles down to you so you can buy a car.
The way regulations currently stand, there's a possibility that we'll never know who got the money or what they bought. If the securities are being sold in big blocks at an auction run by the NY Fed there won't be any obligation to register them and if the buyers are non-public investors like hedge funds there won't be any obligation to disclose the terms of the transaction.
Monday, March 16, 2009
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