This is huge. The Fed announced today that it plans to increase the size of its TALF facility from $200 billion to $1 trillion:
The Federal Reserve Board on Tuesday announced that it is prepared to undertake a substantial expansion of the Term Asset-Backed Securities Loan Facility (TALF). The expansion could increase the size of the TALF to as much as $1 trillion and could broaden the eligible collateral to encompass other types of newly issued AAA-rated asset-backed securities, such as commercial mortgage-backed securities, private-label residential mortgage-backed securities, and other asset-backed securities. An expansion of the TALF would be supported by the provision by the Treasury of additional funds from the Troubled Asset Relief Program.
It is part of Geithner's plan:
The main components of the Treasury’s package today are a joint public- and private-sector fund to buy as much as $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses. The administration also will inject additional taxpayer funds into banks, imposing tighter restrictions that will include limits on dividend payments, acquisitions and executive pay.
Rebecca here: This part of the plan (the $1 trillion toward the public-private investment fund) is designed to be financed by both the private and public sector. Therefore, the burden - in theory - will not lie solely with the Treasury. But the wording is very vague, and at this point there is no reason to believe that the program will work anyway. So I just assume $1 trillion, because even if the Treasury is planning to capitalize the fund with the remaining TARP, $350 billion, then there is plenty of excess spending to get us to $1 trillion - off the top of my head I can think of the remaining $400 billion on MBS by Fed.
It is separate from the stimulus plan:
The Senate approved an economic stimulus bill of some $838 billion on Tuesday, clearing the way for negotiations with the House and increasing the prospects that a final piece of legislation can be on President Obama’s desk within days.
RW: Although the Fed does not specifically say this, but the $1 trillion will be financed purely by "printing money". In one day, the government announced/passed $2.84 trillion of spending, which admittedly will likely be much lower in net, but nevertheless, markets didn't like it.
Probably not so much for the amount of funding, but more so for, let's see, any of the above: Geithner's delivery, Geithner's speech, the lack of details, too many details,...., pick one. I can't help but wonder what would happen if some of these resources were diverted to the economy itself.
You can read the fact sheet for the entire Financial Stability Plan here, and Treasury Secretary Timothy Geithner's remarks here. If you don't want to read that, then read this.