An Empirical Analysis of the Fed's Term Auction Facility

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

Abstract

The U.S. Federal Reserve used the Term Auction Facility (TAF) to provide term funding to eligible depository institutions from December 2007 to March 2010. According to the Fed, the purpose of TAF was to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations. The overall goal of the TAF was to ensure that liquidity provisions could be disseminated efficiently even when the unsecured interbank markets were under stress. In this paper I use the TAF micro-level loan data and find that about 60 percent of TAF loans went to foreign banks that pledged asset-backed securities as collateral for these loans. The data and analysis illustrate the major role that foreign - in particular, European - banks currently play in the U.S. financial system and the resultant currency mismatch in their balance sheets. The data suggest that foreign banks had to borrow from the Federal Reserve Bank to meet their dollar-denominated liabilities.
Original languageEnglish (US)
Title of host publicationCato Papers on Public Policy, Volume 2
Subtitle of host publication2012-2013
EditorsJeffrey A. Miron
Place of PublicationWashington, D.C.
PublisherCato Institute
Pages57-91
Number of pages35
Volume2
ISBN (Print)9781938048920
StatePublished - 2012

Fingerprint

Empirical analysis
Auctions
Loans
Foreign banks
Federal Reserve
European banks
Interbank market
Open market operations
Currency mismatch
Liability
Funding
Asset-backed securities
Financial system
Balance sheet
Liquidity provision

Cite this

Benmelech, E. (2012). An Empirical Analysis of the Fed's Term Auction Facility. In J. A. Miron (Ed.), Cato Papers on Public Policy, Volume 2: 2012-2013 (Vol. 2, pp. 57-91). Washington, D.C.: Cato Institute.
Benmelech, Efraim. / An Empirical Analysis of the Fed's Term Auction Facility. Cato Papers on Public Policy, Volume 2: 2012-2013. editor / Jeffrey A. Miron. Vol. 2 Washington, D.C. : Cato Institute, 2012. pp. 57-91
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Benmelech, E 2012, An Empirical Analysis of the Fed's Term Auction Facility. in JA Miron (ed.), Cato Papers on Public Policy, Volume 2: 2012-2013. vol. 2, Cato Institute, Washington, D.C., pp. 57-91.

An Empirical Analysis of the Fed's Term Auction Facility. / Benmelech, Efraim.

Cato Papers on Public Policy, Volume 2: 2012-2013. ed. / Jeffrey A. Miron. Vol. 2 Washington, D.C. : Cato Institute, 2012. p. 57-91.

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

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Benmelech E. An Empirical Analysis of the Fed's Term Auction Facility. In Miron JA, editor, Cato Papers on Public Policy, Volume 2: 2012-2013. Vol. 2. Washington, D.C.: Cato Institute. 2012. p. 57-91