How is the Federal Reserve protected against loss?
The New York Fed loans under the MMIFF will be fully collateralized by all of the assets of the PSPVs. These assets will be short-term, high-credit-quality debt instruments. In addition, the ABCP issued by each PSPV and held by the investors will be subordinated to the New York Fed loans and will absorb approximately the first ten percent of any losses incurred by the PSPV. Any excess spread earned by the PSPVs will be retained as a further buffer against loss.
