FED plans new series of Bail Outs for Comm Real Estate, Credit Cards, Auto Lenders

Time bomb' in commercial mortgages poses big test for the Fed
The US Federal Reserve is trying to defuse a "ticking time bomb" of hundreds of billion of dollars of maturing loans made to finance shopping malls, office blocks and other commercial property.
The ability to refinance commercial mortgages at low interest rates has been hit hard by the credit crunch. Commercial mortgage loans to the value of $400bn are due to be repaid this year. If the debtors default, the properties backing the debt could be put up for sale, which is likely to push declining prices lower still. "I am very concerned about the ticking time bomb we face in commercial real estate lending," Democratic congresswoman Carolyn Maloney said at a Congressional hearing last month. Her comments are echoed in private discussions with regulators, who fear the sector poses risks to the financial system.
Commercial mortgage financing is split into two sectors. One consists of traditional loans – mostly held by banks or insurance companies. The other consists of bonds backed by pools of loans, so-called commercial mortgage-backed securities (CMBS).
It is this latter sector that the Fed needs to fix. Next week it will offer cheap loans to investors, which they can use to buy CMBS. This method is already being used to pump up demand for securities backed by credit card and auto loans. Extending the plan – the term asset-backed securities loan facility (Talf) – to property is highly complex, not least because of the greater risk of losses. Recently, more than $200bn of CMBS with triple A ratings were downgraded.
"It is very important that the CMBS market revives at some point and that the Fed's plans work," says Aaron Bryson, analyst at Barclays Capital. "It is too much to ask for banks and insurance companies to refinance all the maturing commercial mortgages. The CMBS market is needed, too, to avoid a worsening of the refinancing problems."