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Did the Fed’s Term Auction Facility Work?

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Abstract

The Federal Reserve introduced the Term Auction Facility (TAF) in December 2007 to provide term loans to banks during the recent financial crisis. In this post, we report on the effectiveness of the TAF during the early stages of the crisis. We find that the TAF was associated with a decrease in the “liquidity premium,” one component of a bank’s borrowing cost. In other words, the TAF worked as intended.

Suggested Citation

  • James J. McAndrews & Asani Sarkar & Zhenyu Wang, 2011. "Did the Fed’s Term Auction Facility Work?," Liberty Street Economics 20111011, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86769
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    More about this item

    Keywords

    crisis; Federal Reserve; money markets; term funding; Libor; Term Auction Facility;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G1 - Financial Economics - - General Financial Markets

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