Friday, September 26, 2008

How does Fed raise fund for its book

How does Fed raise funds: via Treasury who issued debts The Board's H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions andCondition Statement of Federal Reserve Banks" has been modified in a number of ways. On September 17, theTreasury Department announced the Supplementary Financing Program. Under this program, the Treasuryissues marketable debt and deposits the proceeds in an account at the Federal Reserve that is segregatedfrom the Treasury General Account. This account is shown as "U.S. Treasury, supplementary financingaccount" in table 1, table 4, and table 5. On September 19, the Federal Reserve announced a new lending facility to extend non-recourse loans to U.S.depository institutions and bank holding companies to finance their purchases of high-quality asset-backedcommercial paper from money market mutual funds. Extensions of this credit are reported in table 1 as"Asset-backed commercial paper money market mutual fund liquidity facility" and reflected in "Otherloans" in table 3, table 4, and table 5. On September 21, the Board of Governors authorized the Federal Reserve Bank of New York to extend creditto the U.S. broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against alltypes of collateral that may be pledged at the Federal Reserve's primary credit facility for depositoryinstitutions or at the existing Primary Dealer Credit Facility. In addition, the Board authorized theFederal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries ofGoldman Sachs, Morgan Stanley, and Merrill Lynch against the types of collateral that would be eligibleto be pledged at the Primary Dealer Credit Facility. Credit extended under these authorizations will beincluded, along with credit extended under the Primary Dealer Credit Facility, in Table 1 under the entry"Primary dealer and other broker-dealer credit."

No comments: