FACTBOX-The Fed's evolving emergency liquidity toolkit
Aug 17 (Reuters) - The U.S. Federal Reserve said on Monday it would extend a multibillion-dollar emergency program to support the flow of credit to commercial property, consumers and small businesses until next year.
The Term Asset Backed Securities Loan Facility (TALF), which was to expire at the end of December, will be kept open until the end of March for asset-backed securities based on consumer and small business loans and for legacy commercial mortgage backed securities (CMBS).
New CMBS, because they take a significant time to arrange, will be eligible for TALF support until the end of June 2010.
Below are brief descriptions of the programs put in place so far to ease credit strains and support the economy:
TERM ASSET-BACKED SECURITIES LOAN FACILITY (TALF):
The TALF aims to revive securitization markets in the hope of spurring consumer and small business lending, as well as to commercial real estate.
The Fed has pledged to lend an initial $200 billion under TALF, with the U.S. Treasury pitching in $20 billion to cover credit risks. However, officials have said the program could grow to $1 trillion. On Aug. 17 is was extended until March 31, 2010 for asset backed securities and legacy CMBS and on June 30, 2010 for new CMBS.
FX CURRENCY SWAP LINES WITH OTHER CENTRAL BANKS:
The Fed -- the U.S. central bank -- has set up currency swap lines with 14 other central banks so they have U.S. dollars to lend in their markets. On June 25 the Fed extended the life of the arrangements by three months to Feb. 1, 2010.
The discount window is the Fed's traditional way of providing liquidity to U.S. banks against collateral. When the Fed cut its overnight interbank federal funds target rate to between zero and 0.25 percent in December, it cut the rate on loans from the discount window to 0.5 percent.
TREASURY PURCHASE PROGRAM:
In March the Fed said it would buy up to $300 billion of Treasury securities over six months. In August it said the pace of these purchases would be slowed to eke them out until the end of October. As of Aug. 11, the Fed had bought about $233 billion worth of Treasury securities.
MORTGAGE-BACKED SECURITIES PURCHASE PROGRAM:
The Fed in November 2008 said it would buy $100 billion in the debt of government-sponsored enterprises Fannie Mae FNM.P, Freddie Mac FRE.P and the Federal Home Loan banks -- and $500 billion in mortgage-based securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. In March the Fed expanded these programs by $850 billion to a total of $1.45 trillion. As of Aug. 13, the Fed had bought about $741.6 billion of agency MBS, and $111.04 billion of agency debt as of Aug. 14.
SHORING UP MONEY MARKET MUTUAL FUNDS (AMLF):
The Fed in September 2008 said it would make discount window loans to financial institutions to allow them to buy asset-backed commercial paper from money market mutual funds. On June 25 the Fed extended the program to Feb. 1, 2010, from Oct. 30, 2009.
COMMERCIAL PAPER FUNDING FACILITY (CPFF):
The Fed in October 2008 said it would fund purchases of highly rated, U.S.-dollar-denominated, three-month commercial paper. Purchases will be made through a special purpose vehicle. The CPFF was due to expire this October but was extended to Feb. 1, 2010.
MONEY MARKET INVESTOR FUNDING FACILITIES (MMIFF):
The Fed in October 2008 announced a $600 billion facility to help money markets to purchase certificates of deposits and commercial paper. It expires at the end of October and the Fed says it will not be extended because markets have improved.
PRIMARY DEALER CREDIT FACILITY (PDCF):
Traditionally, the Fed has lent only to insured depository institutions through its discount window. However, on March 16, 2008 it launched a new facility for investment banks, marking the first time since the Great Depression that it had lent to non-depository institutions. The program has been extended four times and is now due to run through Feb 1, 2010, even though it is currently not being used.
TERM SECURITIES LENDING FACILITY (TSLF):
Under the $200 billion TSLF, the New York Fed conducts weekly auctions of 28-day loans of Treasury securities to primary dealers. It is due to end on Feb 1, 2010. The Fed also auctions options on the TSLF to ease liquidity over traditionally strained end of quarter periods, but on June 25 suspended these auctions due to weak demand.
TERM AUCTION FACILITY (TAF):
The Fed launched the Term Auction Facility in December 2007 to provide funds over a longer period to a wider range of banks. After steadily enlarging the facility at first, the Fed on June 25 cut the size of upcoming TAF auctions to $125 billion from $150 billion, effective July 13.
TERM REPURCHASE AGREEMENTS:
In March 2008, the Fed announced a series of 28-day repurchase transactions for primary dealers, expected to add up to $100 billion.
PAYING INTEREST ON RESERVES:
Congress authorized the Fed in October 2008 to begin paying interest on reserves that banks hold at the central bank, which can help the Fed expand its balance sheet without pushing down interest rates.
OTHER TRADITIONAL TOOLS:
The Fed also provides liquidity through its traditional open market operations and securities lending to primary dealers. The loans of funds or Treasury securities are typically overnight repurchase agreements against collateral of Treasuries, agencies or agency MBS. (Compiled by Reuters' Fed reporting team; Editing by James Dalgleish)
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