Fed Lending Facility Receives No Takers

By MIN ZENG In a sign of further thaw in the credit markets, no primary dealers submitted bids to tap a Federal Reserve facility to help firms meet short-term funding needs. The Fed's Term Securities Lending Facility, or TSLF, was put in place in March 2008 after Bear Stearns Cos. nearly collapsed, and it allows dealers to exchange unsellable securities like some corporate debt, mortgage-agency debt and mortgage-backed securities for Treasurys, which are less risky and easier to swap for cash. AFP/Getty ImagesIt was the first time the facility received no interest from the 16 commercial and investment banks that trade directly with the Fed. The Fed offered $25 billion for Thursday's auction. In general, it is "a good sign when the Fed's emergency facilities run off due to a lack of market demand," said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, N.J., research firm. The program may have run its course as banks and dealers become more optimistic about ways to finance holdings of less liquid assets like mortgage-backed securities, said traders. The Fed and Treasury's Term Asset-Backed Securities Loan Facility is seeing interest from investors and debt issuers for its second round on Tuesday, said bankers. Also, the market is anticipating the launch of programs to fund private investors' purchase of toxic assets clogging banks' balance sheets.