another, and with each institution it ate, it grew bigger and stronger. we had just watched it eat lehman. we could not stop it there because we are only authorized to lend against collateral, and lehman did not have enough collateral. now it was focused on aig. unlike the situation with lehman brothers, we were presented with an action we could take, a loan we could make to avoid the collapse of aig. our knowledge of the company was limited because we had never supervised aig, but the loan could be secured with collateral. based on our assessments of the collateral, we believed the risk of the loans to be limited. and while the risk of making the loan was limited, the risk of not making the loan – of letting aig, which was significantly larger than lehman, fail – was certain to be huge. and no other entity – not a private company, not a consortium of private companies acting together, not any other branch or agency of the government – was in a position to do anything. the clock was ticking, and default was imminent. there was no time to gather more information or find another solution. so i ask you, what would you have done? it was in this context that the federal reserve, with the full support of the treasury, made a loan to aig to prevent its failure. the loan imposed tough terms, senior management was replaced, and shareholders lost almost all of their investments. if i had to cast that vote again, even knowing all that followed, including the criticism that we have received, i wouldn ’ t change it. i still believe that the consequences would have been far worse for all businesses and consumers if we had let aig fail. despite the claims by some that healthier wall street firms or even the small businesses and consumers on main street did not benefit from assistance to aig, i would argue that no business or individual was immune to the effects of a sequential collapse of key financial intermediaries. as it was, we still had frozen credit markets that necessitated the facilities i discussed earlier. in the wake of the lehman failure and the near failure of aig, it was as if someone turned off a switch on business activity. almost overnight, businesses went into full protection mode, halting all capital expenditures, shedding inventory, and slashing expenses. in the face of massive unemployment caused by layoffs and business failures, consumers stopped spending. this first became clear to me during the october 2008 board of directors meeting at the

started to freeze, we were swamped with stories from a steady stream of trade associations, businesses, individuals, lenders, and others about the consequences of problems with abs. knowing that families and firms need access to loans to pay for college, replace worn - out cars, or upgrade computer systems, staff at the fed worked around the clock to develop a credit facility that would help individuals and small businesses by jump - starting new issuance of abs. in late november 2008, the federal reserve, working with the treasury, created the term asset - backed securities loan facility ( talf ). under the talf, the fed extends loans to investors to help finance their purchases of highly rated abs. banks and other intermediaries were then willing to renew their lending to consumers and small businesses because they knew that investors would purchase securities backed by the new loans. the talf has helped encourage loans to households by facilitating a resumption of activity in securities made up of auto loans, student loans, and credit card loans. the talf also helped enable mortgage modifications aimed at keeping people in their homes. mortgage servicers need funds to make the payments on delinquent mortgages while the loans are being modified. smaller servicers have been able to bundle the payment advances as talf - eligible securities, easing the pressure on the servicers to foreclose. the talf has also supported small business lending through equipment loans, fleet financing, sba loans, and floor - plan financing for everything from automobiles to lawnmowers. in addition, thousands of small businesses were able to finance the purchase of property and casualty insurance by taking out insurance premium loans that were, in turn, securitized. in total, more than 3 million auto and student loans to households have been facilitated through the talf as well as nearly half a million loans to small businesses and millions of credit card accounts to both consumers and businesses. talf loans also have been used to finance purchases of commercial mortgage - backed securities ( cmbs ), a market that until late 2009 had been completely frozen for more than a year. in fact, in november 2009, talf funds were used to help bring to market the first new issue cmbs since june 2008. and since that first deal, two others have funded without assistance from the talf, and several more are in various stages of development. we hope that our work in the commercial mortgage sector will help alleviate some of the strains in commercial real estate funding. as many