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The Fed
Expands Lending Programs October 6,
2008 The
Federal Reserve announced today a substantial expansion in the size of its Term
Auction Facility (TAF) to strengthen its support of term lending markets. These auctions allow depository institutions
to borrow from the Fed for a fixed term of 28 or 84 days by pledging same type
of collateral that is acceptable through the discount window. The rate paid for the lending is determined
at auction. In addition, the Fed is
consulting industry experts on additional ways the Fed or the Treasury could provide
support for unsecured lending in the market. The
Fed also announced it would begin paying interest on reserves held at the Fed
sooner than originally planned. Interest
will be paid on both required reserves and excess reserves, but at different
rates. The rate paid on excess reserves
will be initially set at the average targeted federal funds rate over each
maintenance period less 75 basis points.
Required reserves will be paid a higher rate of interest at the average
targeted fed funds rate for each reserve maintenance period minus 10 basis
points. The changes will take place
beginning October 9th. Kristin Brewer
Additional economic and market information is available through ReSources, a bi-weekly report published by Southwest Corporate Investment Services’ Advisory Services Group. Click here to view this week's edition. |
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