Fed to offer $60 billion via term auction facility in March; reiterates TAF policy support
Posted by: in HousingFiled under: Other issues, Good news, Abbott Laboratories (ABT), Housing, Federal Reserve
The U.S. Federal Reserve will conduct two auctions of 28-day credit through its Term Auction Facility in March, the Fed announced Friday, in a statement.
The Fed said it will offer $30 billion in an auction on March 10, 2008 and $30 billion in an auction two weeks later, on March 24, 2008.
The Fed also reiterated its support for the term auction facility policy. The Fed said: “The Federal Reserve intends to conduct biweekly TAF auctions for as long as necessary to address elevated pressures in short-term funding markets. Decisions regarding auctions in April will be announced by Friday, March 28.”
The Fed also announced some technical changes to procedures for the March auctions to improve the overall efficiency of the auction process. The minimum bid rate and other auction details will be announced at 10 a.m. EDT (New York time) on Monday, the auction day. Previously, this information had been provided on the Friday before each auction. In addition, the bidding period will be shortened to two hours — to 11 a.m.-1 p.m. EDT (New York time) — from the three-hour bidding period that had been used in previous auctions.
The results of each auction will be announced at 10 a.m. EDT (New York time) on the Tuesday following each auction; final settlement will occur on the Thursday following each auction.
Economic Analysis: The Fed’s announcement will no-doubt be welcomed by many executives and economists, among others. The $60 billion will supply short-term funds for those banks that need it, and the Fed’s statement reiterates Fed Chairman’s Ben Bernanke’s commitment to keep the Term Auction Facility open “for as long as necessary,” as the nation deals with its most serious financial problem since the savings and loan crisis of the late 1980s-early1990s. Perhaps more significant than any other TAF consequence, the TAF ’s funds “adds more time to the time clock,” to borrow a sports metaphor, giving banks more time to adjust operations to deal with losses in subprime mortgages and related asset products.
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