Hedge Funds Use Fed to Haul in the Cash

[Jordan]

The Fed on Wednesday released the names of 177 borrowers that obtained a total of $71 billion in loans from the TALF program to buy newly issued asset-backed securities with a market value of about $79 billion. In effect, buyers were able put up a small amount of their own money and borrow about 82% to 95% of the securities' value.

The program generated big returns for investors—as high as 48% in some cases at the height of the crisis, though more commonly in the range of 20% to 40%, analysts say. Toward the end of the TALF program, as yields on many securities fell, returns for borrowers were closer to 10%.

Most of the Fed loans carried interest rates of between 1% and 2% and were used to purchase securities with higher yields. The borrowed money juiced some of those returns to double-digit levels at relatively little risk to the buyers.

http://online.wsj.com/article/SB1000...googlenews_wsj

[Jordan]

Moral of the story? The Fed should be your go-to hard money lender.

[johnny.rebel]

The Fed on Wednesday released the names of 177 borrowers that obtained a total of $71 billion in loans from the TALF program to buy newly issued asset-backed securities with a market value of about $79 billion. In effect, buyers were able put up a small amount of their own money and borrow about 82% to 95% of the securities' value.

The program generated big returns for investors—as high as 48% in some cases at the height of the crisis, though more commonly in the range of 20% to 40%, analysts say. Toward the end of the TALF program, as yields on many securities fell, returns for borrowers were closer to 10%.

Most of the Fed loans carried interest rates of between 1% and 2% and were used to purchase securities with higher yields. The borrowed money juiced some of those returns to double-digit levels at relatively little risk to the buyers.

http://online.wsj.com/article/SB1000...googlenews_wsj

damn i gotta get on the inside information tract ,,, 48%!

[Jordan]

damn i gotta get on the inside information tract ,,, 48%!

Yeah I wish there were a way to know if those returns are cash on cash returns or total ROI. Hard to tell from the language of the article, and the numbers are ridiculous enough to be pure capital appreciation, or highly-leveraged cash on cash returns from interest rate arbitrage.

Man, total ROI of 48% with only 5-18% down. *drool* That would be the life.