WASHINGTON, D.C. — SubPrime Auto Finance News obtained a copy of a letter several members of Congress sent to Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Timothy Geithner yesterday that requests more auto industry relief from the Term Asset-Backed Securities Loan Facility.

More specifically, 13 congressional members addressed the need for more accessible floor-planning securitization assistance. Many media reports have come out about dealers having to close up shop due to their inability to finance inventory.

The letter states, "As you know, the ongoing global financial crisis has had a particularly damaging effect on the American automobile industry. We applaud the joint efforts of the Federal Reserve Board and the Department of Treasury to promote liquidity in consumer loan markets through the Term Asset-Backed Securities Loan Facility. However, we are concerned that the program may not sufficiently address the problems facing the domestic automobile industry.

"Unlike many other Federal Reserve facilities which allow any investment grade collateral to be pledged, the TALF program is currently limited to only AAA-rated assets," the Congressional members continued. "In light of the uncertainty facing the automobile industry, it appears that the major rating agencies are reluctant to deem any portion of a loan to an auto dealer as AAA. Unfortunately, this means that the domestic auto finance companies are unable to use the TALF program to accommodate dealer floor-plan financing."

The 13 members of Congress went on to highlight the fact that this is a "critical issue for the domestic automobile industry."

"We appreciate Federal Reserve Chairman Bernanke's recent statement that he is willing to revisit this issue. Given the urgent nature of the crisis in the motor vehicle industries, we encourage you to consider finding a way to ensure adequate financing for dealer floor plans as soon as possible," they concluded.

The Congressional members who added their signatures to the letter include Gary Peters, Thaddeus McCotter, Barney Frank, Paul Kanjorski, Brad Miller, Donald Manzullo, Emmanuel Cleaver, Ron Klein, Mary Jo Kilroy, Joe Donnelly, Andre Carson, Dan Maffei and David Scott.

Their statement echoes that of the American Financial Services Association. In particular, AFSA said that it believes the TALF program must be expanded to permit eligibility for securities beyond those with an AAA rating. Without additional changes, lenders will continue to face funding challenges — and many potential borrowers may still find themselves unable to buy or lease a car.

Chris Stinebert, president and chief executive officer of AFSA, said, "Of particular concern is the effect on floor-plan financing, which auto dealers use to buy their inventory. Without an expansion of TALF's eligibility requirements, 50 percent of floor-plan ABS will be shut out of the program, creating a domino effect that will impact all lenders and dealers. 

"Going forward, AFSA will continue to emphasize the important role played by the auto finance sector in any type of economic recovery program. We call upon the Treasury and Federal Reserve to expand TALF's eligibility requirements beyond those that are AAA rated. These modifications are urgently needed for the TALF program to be successful for auto-backed ABS and to avoid systemic risk for the entire auto finance market," he added.