Subprime
Posted at 8:38am on Apr. 1, 2008 Finally, a Winning Formula at the Federal Reserve?
The Term Securities Lending Facility May Be Working
By blackhedd
As much as I hate to subject you all to this, here's a piece of seriously complex Federal Reserve news. I'll explain it as best I can, however. The bottom line appears to be: it's good news.
You've certainly heard that the Bernanke Fed have been doing unprecendented, aggressive and creative things in their attempts to stabilize financial markets. (To mitigate the effects of a US recession is an entirely different problem, and not the current priority.)
One of the things the Fed did was to set up a Term-Securities Lending Facility, or TSLF. What the heck is that?
It's a weekly auction, to be held every Thursday for the next six months. The Fed will offer liquid, risk-free Treasury securities from its inventory, in return for specific kinds of risk-bearing securities, notably mortgage-backed securities. They just held the first one on March 27, and although the results are not unambiguous, the auction does seem to have had a material positive impact on the money markets.
Keep reading.
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