NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Empirical Analysis of the Fed's Term Auction Facility

Efraim Benmelech

NBER Working Paper No. 18304
Issued in August 2012
NBER Program(s):   AP   CF   EFG

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.

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Document Object Identifier (DOI): 10.3386/w18304

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