Consumers and small businesses may finally get the loans they need, as the Federal Reserve is launching its much awaited $200 billion consumer credit program, although markets and exchange traded funds (ETFs) may need more than that for a sustained rally.
TALF. Autos, education, credit cards may soon become available to consumers as the Term Asset-Backed Securities Loan Facility will finally be launched. Jeannine Aversa for the Associated Press reports that companies and investors that pledge eligible collateral to back the loan must request the new government loans by March 17. The Fed will provide the three-year loans on March 25.
Jeannine Aversa for the Associated Press also reports that Federal Reserve Chairman Ben Bernanke told Congress that the financial recovery must ultimately be led by the financial sector. The government must be able to prop up the unstable financial system in order for a turnaround to begin.
The effectiveness of a string of radical actions taken by the Fed, the Treasury Department and other agencies to stabilize markets “will be critical determinants of the timing and strength of the recovery,” said Bernanke to the Senate Budget Committee.
A New Low. Meanwhile, the number of pending home sales has fallen to 7.7%, a new low set in January. The National Association of Realtors seasonally adjusted index of pending sales contracts fell 7.7% to 80.4 in January from a downwardly revised December reading of 87.1.
Economic hardships such as job loss, instability and falling home values are turning potential buyers away from the housing market. Pending sales were down in every region but the West, where soaring foreclosures have made prices especially attractive for buyers.
Takeover Bid. In an aggressive attempt to defend the company, Genentech claimed that the $42 billion bid from Roche greatly undervalued the biotechnology company and would undermine the innovative culture. Three independent Genentech directors advised shareholders to reject Roche’s latest proposal to buy the 44% of the company it does not own at $86.50 a share, after rejection of its $89 bid last summer.
Andrew Jack and Jennifer Macintosh for The Financial Times report that the offer conditions give Roche the option to cancel or amend its offer, which is scheduled to expire on March 12, on a number of grounds including if any one of four indexes – including the Nasdaq or S&P 500 – lose more than 15% from Feb. 6. By yesterdays’ close, the S&P 500 had lost 19%.
- Biotech HOLDRs (BBH): down 8.3% year-to-date; up 0.6% for three months; Genentech is 41.9% of assets
