The head of the Washington Bankers Association, President/CEO James Pishue, said he believes the federal government’s proposed new Term Asset-backed-security Loan Facility (TALF) program could possibly get bank lending flowing once again.
In an interview with SCBJ in late March, Pishue said, “if the TALF program could buy up some of the toxic debt banks are holding it may loosen credit up, which bodes well with the stock market.”
When the economy began faltering because of problems in the home financing industry, “it left a lot of inventory and money on the sidelines” and potential buyers have been reluctant to come into the market, he said.
“I think at this point, looking at the low housing prices and with interest rates being at around 5 percent or just under, an historic low, we could see home buying moving again,” he said. “With such low rates and having ample inventory, plus the $8,000 tax credit for first time buyers until the end of 2009, it’s a buyers’ market.”
The TALF program, launched by the Treasury Department, is supposed to buy up that batch of bad debt, but it included enticements for private investors to get into the mix on the purchases.
If the plan works, Pishue thinks it will clear bad debts faster than TARP money, encouraging lenders to get back into lending more aggressively, thus priming the loan market once again and building confidence in the economy.
“I think that will help the investor market and take a lot of bad debts off the books, which is also a positive,” he said. “Obviously, banks are stressed by their involvement in the home building and land development market so once those things get moving again you should see better results from banks as they become stronger, not just in Snohomish County but elsewhere, too, of course.”
He believes that re-energizing the housing market “also means re-energizing the Home Depots, lumber companies, appliance dealers and all those industries involved in housing, which would be really positive … when housing stats start moving up again we will also see a move in confidence, economic numbers will rise and we’ll begin to thaw out this so-called freeze in the housing market.”
The original Troubled Asset Relief Program (TARP) was set up to use $700 billion in U.S. Treasury funds to buy up bad debt assets, primarily sub-prime loans that couldn’t be paid back. Finding that many of those same toxic assets still linger in the marketplace, the new $500 billion Public-Private Investment Plan was created in the hope it would finish TARP’s work, he said.
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