According to federal records, 177 firms participated in TALF, many of them well connected in Washington or on Wall Street. For investors, there was little risk and a high chance of reward. The Federal Reserve funded as much as 90% of the investments. If the bonds were profitable, the borrowers benefited. If not, the department agreed to take over the depreciated assets with no repercussions for the borrowers.
“It’s very complicated to become qualified as a TALF borrower or as a TALF fund, if you will,” Carol Pepper, a wealth management specialist, told Forbes in 2009. “But that’s an example of where, if you can get into a TALF fund, you can benefit from this government program.”
Under the terms for the program, any U.S. company looking to invest in select categories of bonds was eligible to apply for the loans. However, the Treasury Department and Federal Reserve maintained the “right to reject a borrower for any reason,” and the internal selection process was criticized by some lawmakers as opaque and open to corruption.
“How can my constituents in Vermont get some of that money? Who makes the decisions? Do you guys sit around in a room — do you make it? Are there conflicts of interest?” Sen. Bernie Sanders asked Federal Reserve Bank Chairman Ben Bernanke at a March 3, 2009, Senate hearing. “Do you have to be a large, greedy, reckless financial institution to apply for these monies?”