Fed Working With Overseas Central Banksby Tim Manni
In an attempt to alleviate chronic strains in the credit markets, the Fed is continuing to team up with the European Central Bank (ECB) and the Swiss National Bank (SNB) to ease liquidity pressures in term funding markets. The Fed announced today they are increasing the amount of money auctioned at the bi-weekly Term Auction Facility (TAF) to $75 billion from $50 billion. Launched back in December, the TAF has consistently increased the amount of money offered to financial institutions to assist the credit markets.
In correlation with increasing TAF’s resources, the Federal Reserve has temporarily increased currency swap lines with the ECB and SNB to fulfill the demand for the dollar in European markets. These provisions will provide $50 billion in U.S. dollars to the ECB and $12 billion U.S. dollars to the SNB.
Also, the Fed is expanding the pool of collateral that can be pledged in the Term Securities Lending Facility (TSLF). AAA rated asset-backed securities will be able to be pledged by May 9 of this year. Expanding the pool of collateral should help to boost conditions in a wider range of financial markets.
What does all this mean to mortgage shoppers? The intent is to stabilize and return some normalcy to U.S. credit markets – which will in turn make mortgage money more readily available.