FACTBOX: The Fed's evolving liquidity toolkit

(Reuters) - The U.S. Federal Reserve said on Wednesday it was expanding and tweaking the parameters of its money market credit facility to include a wider array of investors and keep the program viable even with money market yields at rock-bottom levels.

The Money Market Investor Funding Facility was authorized in October as a way to keep credit flowing to mutual funds.

The program will now be open to other money market investors, including certain U.S.-based investment funds, government investment pools and common trust funds.

The Fed continues to create and fine-tune a number of programs to support credit availability at a time financial market functioning remains impaired.

The following is a look at the Fed's evolving liquidity toolkit:

DISCOUNT WINDOW

The discount window is the Fed's traditional way of providing liquidity to the depository institutions that it regulates. The Fed's first liquidity salvo was on August 17, 2007, when it unexpectedly lowered the discount rate by a half percentage point, narrowing the spread above the benchmark federal funds rate -- the rate banks charge each other for loans -- to a half percentage point. It narrowed the spread to just a quarter point on March 16 of this year. The Fed accepts a broad range of collateral for loans at the discount window. When the Fed set a fed funds range of zero to 0.25 percent on December 16, it set the discount rate at 0.50 percent.

SHORING UP MONEY MARKET MUTUAL FUNDS

The Fed on September 19 said it would make discount window loans to financial institutions to allow them to buy asset-backed commercial paper from money market mutual funds. The program is intended to assist money funds that hold such paper in meeting demands for redemptions by investors and to foster liquidity in the asset-backed commercial paper market and money markets. The program was initially set to run through January but has been extended to April 30, 2009.

MORTGAGE-BACKED SECURITIES PURCHASE PROGRAM

With the goal of boosting credit available for the purchase of houses, the Fed on November 25 announced a program to buy $100 billion in the direct obligations of housing related government sponsored enterprises (GSEs) -- Fannie Mae, Freddie Mac and the Federal Home Loan banks -- and $500 billion in mortgage-based securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. On December 30, the Fed said it had selected investment managers BlackRock Inc, Goldman Sachs Asset Management, PIMCO and Wellington Management Co to conduct the MBS purchase program, which started operations in early January.

TERM ASSET-BACKED SECURITIES LOAN FACILITY (TALF)

The Fed on November 25 announced a funding facility to help market participants meet the credit needs of households and small businesses. The New York Fed will lend up to $200 billion on a non-recourse basis to holders of some AAA-rated asset-backed securities (ABS) collateralized by student loans, credit card loans and the like. The Treasury will pitch in $20 billion to help underwrite those investments.

COMMERCIAL PAPER FUNDING FACILITY (CPFF):

The Fed on October 7 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 that began purchases on October 17. The CPFF will cease purchases on April 30, 2009, unless extended.

MONEY MARKET INVESTOR FUNDING FACILITIES (MMIFF)