Congressmen say TALF falls short on floorplanning

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Several members of Congress sent a letter to Federal Reserve Chairman Ben Bernanke last week expressing concern with elements of the Term Asset-Backed Securities Lending Facility that could be deterring participation for non-auto floorplan asset-backed securities.

In March, non-auto floorplans were included as an eligible asset class in TALF. However, there has been no issuance of non-auto ABS to date largely because of the comparatively high “haircut levels” for non-auto ABS, according to the letter.

A “haircut” is the percentage amount deducted from the market value of the ABS to account for the risk of loss that the investment poses. The letter encourages the Treasury and the Fed to re-examine the haircut levels for non-auto ABS in order to increase liquidity in the marine industry.

“Access to credit and reasonably priced capital remain difficult for U.S. marine dealerships and manufacturers despite all recent recovery efforts,” stated U.S. Rep. Pete Hoekstra, R-Mich., one of the members of Congress signing the letter. “Many lenders have left the market completely, causing job losses and an erosion of the marine industry.”

Thom Dammrich, president of the National Marine Manufacturers Association, praised the bipartisan effort to increase liquidity in the secondary markets for dealer floorplan loans, calling it an “extremely critical issue” for the boating industry.

“We hope that Treasury Department and Fed officials recognize that the current haircut levels are discouraging investor and lender participation in this vital program,” he said in a statement.

To read the full letter, click here.

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