Now, hedge funds to be bailed out

22 December 2008

After insurance giant AIG, banks and car markers, it is the turn of hedge funds to get a bail out.

Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200-billion programme intended to support consumer credit.

The new programme is aimed at injecting credit for consumers and small businesses including auto loans and credit cards will be launched in February.

The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before.

The New York Fed will offer loans under the TALF on a monthly basis. On a fixed day each month, borrowers will be able to borrow by means of one or more loans by indicating for each loan the eligible collateral, the desired amount, the desired interest rate format -- fixed or floating.

The New York Fed will disburse loans to the borrower upon receipt of collateral, wih the minimum size for each loan being $10 million.