Finance Firms Seek ABS Guarantees

The American Financial Services Association is urging president-elect Barack Obama's transition team to consider several options to increase consumer credit, including bond insurance for asset-backed securities issued by finance companies. "Government must play a direct and immediate role in bringing liquidity and confidence back to the securitizations market through the purchase of securities or by issuance of insurance or guarantees," according to an AFSA report sent to the transition team. "Finance companies extend 40% to 50% of all consumer lending in the United States," AFSA executive vice president Bill Himpler said. But he noted that the flow of credit from finance companies to consumers is threatened by today's financial crisis. AFSA also wants the new administration to give Community Reinvestment Act credit to banks that extend credit to finance companies that are offering workouts to struggling borrowers.