Transcripts

"Two Ways To Play"-Kevin Depew of Minyanville

SUSIE GHARIB: Well, there are many questions about the Fed's latest multi-billion dollar plan to spur consumer and business lending. For example, will it work and will companies take part? Tonight's two ways to play has some answers. Here's Minyanville's Kevin Depew and Kevin Depew of Minyanville.

KEVIN DEPEW, MINYANVILLE: Finally, some good news, the governments Term Asset-Backed Securities Loan Facility or TALF, a trillion dollar program designed to revive lending, is ready to launch. The Fed is hoping that TALF will encourage banks to make new loans by making the securitization of those loans easier. Securitization is simply repackaging loans into bundles that are sold to investors. Last year securitization plummeted by $2.4 trillion compared to two years ago. We need securitization because it frees up banks to make loans that businesses and consumers desperately need. TALF is a good first step. Really? Bear with me as I go through some financial acronyms: TARP, TAF, TSLF and now TALF. How about before we cobble together yet another trillion dollar program, we ask why? Why are credit markets frozen? The answer is simple: for credit expansion we need both the means -- credit from the Federal Reserve and banks -- and the motive, the desire to take on more debt. For more than a year now we've had record amounts of the former, but none of the latter. The Fed can make infinite amounts of credit available, but if no one wants to take on more debt, they'll just have to come up with a new acronym.