Current Issues in Economics and Finance

The Federal Reserve’s Term Auction Facility

July 2008Volume 14, Number 5
JEL classification: E50, E58, E59

Authors: Olivier Armantier, Sandra Krieger, and James McAndrews

As liquidity conditions in the term funding markets grew increasingly strained in late 2007, the Federal Reserve began making funds available directly to banks through a new tool, the Term Auction Facility (TAF). The TAF provides term funding on a collateralized basis, at interest rates and amounts set by auction. The facility is designed to improve liquidity by making it easier for sound institutions to borrow when the markets are not operating efficiently.

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