A new coalition of non-bank investors is hoping to help restore liquidity to the student loan auction rate securities (SLARS) market - and by doing so create up to US$63bn of stimulus and up to 441,000 jobs.

Members of the 'SLARS Coalition' hold approximately US$8bn of the aggregate US$25bn estimated to be held by non-bank corporations. Their goal is to advocate for a broader solution to the SLARS marketplace and, in so doing, to generate broader economic growth that would speed the recession recovery.

More than 25 non-bank investors have joined to form the SLARS Coalition, which is working to bring this issue to the attention of Congress, the US Treasury, the SEC and the Office of the NY Attorney General. The coalition commissioned University of Delaware economists James Butkiewicz and William Latham to investigate the potential impact that a systemic solution for non-bank SLARS investors would have on national economic growth, and to publish their research in a whitepaper (see last week's issue).

This whitepaper concludes that restoring liquidity to US$25bn of the frozen SLARS market currently held by non-bank investors would generate an immediate US$58bn to US$63bn of economic stimulus. If the restored liquidity was spent for capital expenditures in a single year, a total of 441,000 jobs would be created.

"The strain put on companies holding illiquid SLARS, such as heightened borrowing costs and weakened earnings, has the effect of aggravating the scarcity of credit and financing that many companies have experienced since the onset of the recession, which in turn further depresses overall economic activity," says Butkiewicz, whitepaper co-author and professor of economics, University of Delaware. "Restoration of liquidity to these securities would result in immediate stimulative effects from business capital investment and would likely be more rapid than those from the federal stimulus programme."