Subscribe to this blog's feedSome of them are proving popular: Fed's Direct Loans to Banks Climb to Record Level
Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion.
Some are not: (via Alea) $25 billion offered through the Term Securities Lending Facility, $7.24 billion accepted.
And some are being abused: ECB liquidity scheme fears
The European Central Bank yesterday voiced its "high concern" at growing evidence that banks are exploiting its efforts to unblock the frozen funding markets by using its liquidity scheme to offload more risky assets than it envisaged.
Yves Mersch, a governing council member, said the ECB was now "looking very hard at whether there is not a specific deterioration of collateral" which the central bank is accepting in return for funds...
Mersch raises the problem of moral hazard and worries that the ECB will be left owning rather a large amount of low-quality assets which it will then be unable to shift.
So what does this mean? Last month's TSLF auction was poorly attended as well - viewed as a sign of success.
This paper from Morgan Stanley goes into details:
The Fed has channeled its aggressive actions through five facilities — its regular open market operations, the discount window, and three new ones: the Term Auction Facility (TAF), the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF). Each of these addresses strains at different institutions and in different markets, so it’s hardly surprising that different money-market metrics yield different messages. For example, the discount window and the PDCF provide daily access to funding in amounts demanded by eligible depository institutions and primary dealers, respectively, at a penalty rate. In contrast, the TAF and TSLF auction set amounts of term funding on announced dates to depository institutions and primary dealers, respectively, but are aimed at improving liquidity and functioning in funding markets rather than the needs of individual institutions... falling usage and low bid-to-cover ratios for the PDCF and TSLF and reduced tensions in repo markets reflect the success of the TSLF and PDCF in providing funding to primary dealers.
Risk has covered the interventions in detail - see here and linked articles.
