, which should result in lower lending costs and should make the assessment of the risk of the assets easier. fourth, i think the overall securitization market will be smaller. the demise of parts of the shadow banking system such as the sivs and the fact that banks are likely to have to consolidate some off - balance activities back onto their books at the end of this year should reduce the overall demand for and supply of securitized product. developing and implementing the talf has been challenging. as the program enters into a new phase with the financing of cmbs and legacy cmbs, we will encounter further hurdles that we will have to overcome, adjusting and modifying the program as needed in order to make it more effective. nevertheless, i am confident that we will continue to build on our initial success, reopening credit channels to consumers and businesses. thank you very much for your attention.

of the underlying securities falls. investors ’ actions to seek attractive returns lead to lower borrowing costs for households and businesses. does the possibility of attractive returns for talf investors mean that the federal reserve is taking on large credit risks? i think the answer is a clear “ no, ” principally because the returns earned by investors primarily are due to the absence of sufficient private balance sheet capacity rather than underlying credit risk. in fact, from the federal reserve ’ s perspective, the risk of loss is very low. indeed, there are three layers of protection that stand between the federal reserve and losses. first, the underlying securities are aaa - rated, which means that losses on the underlying loans have to be unusually large to move that high up in the capital structure. and although some of the rating agency models have not held up well in the crisis, the consumer abs models have proven to be reasonably robust. in other words, a aaa - rating still means quite a bit in this market. this is in contrast to the collateralized debt obligation or cdo market, where aaa - rated securities often used subprime and alt - a mortgage loans as their raw ingredient. second, as noted earlier, the fed has taken additional haircuts against the underlying securities averaging about 10 %. these haircuts provide additional protection to the fed. third, if the underlying collateral is put back to the fed, the fed puts the collateral into a special purpose vehicle. in such a situation, the fed would be protected by the excess spread earned on the talf loans and treasury - provided tarp capital. only if those buffers were wiped out, would the fed suffer losses. we have done stress simulations on the underlying loans. we think it is unlikely that the treasury will lose money on this program, and it sits ahead of the fed in terms of its loss exposure. the risk posed to the federal reserve therefore seems quite remote. instead, we expect that the program will be profitable for the taxpayers and will be successful in pushing down yields and increasing credit availability. turning from the issues of design and risk to issues concerning implementation and effectiveness, we have been rolling the talf out in stages – first the consumer abs market, with the first subscriptions for talf loans in march ; second, new cmbs securitizations that will start in early summer ; and third, legacy cmbs and, possibly legacy rmbs, later this summer. by legacy assets, we mean highly - rated existing securitized