Private Equity Firm Pushes for Broader Access to Fed Lending Program

“Better functioning capital markets and potentially more support in asset prices would be beneficial for them as an organization,” said Devin Ryan, a research analyst at JMP Securities who covers banks and alternative-investment firms. The potential benefits of Mr. Rowan’s recommendations were hard to gauge, Mr. Ryan said, without having much more detail on both his proposals and Apollo’s many holdings.

Apollo, whose presentation was initially reported by Bloomberg News, and TPG aren’t alone in pushing for more out of the emergency lending program. The Structured Finance Association, an industry trade group, has previously urged the Fed to include older securities, not just newly-issued assets.

Members of the House Financial Services Committee, which helps to oversee the central bank, wrote to the Fed Chair, Jerome H. Powell, on Wednesday to urge him to expand TALF to include additional types of consumer credit as collateral to help keep credit flowing as non-bank lenders and financial technology firms struggle.

The Fed and the Treasury Department face a tough trade-off when it comes to broadening TALF, which remains a possibility, according to a person familiar with the matter. It could make the program riskier for the central bank, requiring more backup from Treasury and siphoning the backstop away from other programs — including one that could help midsize businesses and others that can help state and local government debt markets.

Helping out slightly riskier companies could also reward firms that have not carefully minded their credit ratings, putting a floor under them even if they made less-responsible choices when times were good.

Yet the Fed’s programs are meant to improve market functioning and if corporate debt markets come under extended strain, it could prove bad for the economy as a whole.

“The policy goal should be to address the parts of the market that are the most critical and require the most help,” according to the draft presentation.

The document states that given the severity of the coronavirus shock, and compared to economic packages rolled out in Europe and China, Congress’ $2 trillion rescue package “is severely underestimating the size of the required response.”

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