TALF -- Expanded to Include Legacy CMBS

Yesterday afternoon, the Federal Reserve announced the expansion of TALF to include "certain high-quality commercial mortgage backed securities issued before January 1, 2009 (legacy CMBS)" as eligible collateral for TALF loans. When the Fed originally announced the expansion of the program to include CMBS, it limited eligible CMBS to those issued after January 1, 2009.  Noting the CMBS market "came to a standstill in mid-2008," the Fed's move to include legacy CMBS is aimed at promoting price discovery and liquidity in the CMBS market in the hopes of reviving the market and stimulating the issuance of new CMBS. That would then enable borrowers to purchase new commercial properties or refinance existing mortgages. The TALF Terms and Conditions list the criteria for legacy CMBS to be eligible TALF collateral.  A few noteworthy ones are that legacy CMBS must be senior in payment priority to all other interests in the underlying pool of commercial mortgages; they must have at least two triple-A ratings from DBRS, Fitch Ratings, Moody's Investors Service, Realpoint, or Standard and Poor's; and they must not have a rating below triple-A from any of those rating agencies.

According to the Fed, the CMBS market has financed roughly 20 percent of outstanding commercial mortgages, which includes mortgages on office buildings, multi-family residential properties, retail complexes, and industrial properties. Only the June 16th subscription, the first round for CMBS collateral, will be limited to newly issued CMBS.  Starting with July's subscription, both new and legacy CMBS will be eligible. The Fed has not announced the July subscription date, but it is likely to be mid-month. The next regular TALF subscription date is June 2nd. The New York Fed is continuing to develop the requirements for legacy CMBS.

Federal Reserve Bank of New York -- Updated TALF Documents

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Anonymous Banker - June 22, 2009 10:02 AM

Anonymous Banker asks: Trepp LLC, TALF and JP Morgan Chase Connection... is there a conflict of interest?

With apologies, I had difficulty getting the links to connect into this comment. Please go to original article for links to supporting documents.

I hate the TALF program. It is going to come back to bite each and every one of us .... the taxpayers. First it was designed to get our securitization market flowing again, presumably to unfreeze the credit markets. It is to be a mechanism for the Treasury Department to guarantee, with our tax dollars, toxic loans stripped from the Banks' balance sheets. It is duplicitous and it was designed to be that way. Now, in addition to subprime credit cards, subprime auto loans (FRBNY's words, not mine), student loans, and small business loans, they've tagged on Commerical Mortgages.

So I went to the FRBNY's website to read up on the terms and conditions and found that the FRBNY has hired a collateral monitor, a company by the name of Trepp LLC. And I was simply curious to find out if I could find out who really owned Trepp and if it's involvement is as "arms length" as one would expect it to be.
Here is an interesting interview by CNBC with Tom Fink, senior vice president of Trepp. I noticed that CNBC never once asked him if there could be any perceived conflict of interest with Trepp accepting this position as "The Feds new Toxic Avenger".

So, I pose this question to the blogging universe and to our leaders on the Hill and to President Obama:
How many Commercial Mortgages will Chase Bank be allowed to unload through TALF, a government program that has hired as its collateral monitor Trepp LLC whose UK Parent company utilizes, as their stockbroker, a company that is owned 50% by JP Morgan Chase.
Does anyone else see this as a conflict of interest?
Here's the back up data to this question. Read it and decide for yourself. If you think I'm wrong, I'd love to hear you tell me why you think I'm wrong.

About Trepp, LLC
Trepp LLC, headquartered in New York City, is an established independent provider of CMBS and commercial real estate information, analytics and technology in the securities and investment management industry. Trepp serves the needs of both the primary and secondary markets by providing one of the largest commercially available trading quality CMBS deal libraries, as well as a suite of products for the CRE derivatives and whole loan markets. Trepp's clients include broker dealers, commercial banks, asset managers, and investors.

About PPR
PPR, headquartered in Boston, is an established provider of independent global real estate research and portfolio strategy services to the institutional real estate community. PPR provides views on markets in North America, Europe and Asia and offers expertise in real estate markets, real estate portfolio analysis, mortgage risk, and the design of real estate investment strategies. Clients include commercial banks, insurance companies, Wall Street firms, rating agencies, government agencies, pension funds, investment advisors, real estate investment trusts, and private investors.
Trepp and PPR are each wholly owned by DMG Information, Inc., the business information division of Daily Mail and General Trust, plc (DMGT).
And here's information on the parent company: Daily Mail and General Trust , plc (DMGT)
and their "stockbrokers"

JPMorgan Cazenove Ltd
20 Moorgate
Great Britain
Cazenove Group is a private company, registered in Jersey, which holds the 50% interest in J.P. Morgan Cazenove, the joint venture with J.P. Morgan. J.P. Morgan Cazenove is one of the UK's leading investment banks. Jointly owned by J.P. Morgan and Cazenove, it combines innovative and impartial advice with a broad range of capabilities and proven execution skills.

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