« Changing credit scores - and new set of intangibles | Main | An intangible pays off »
March 11, 2008
Lending on asset-backed securities
Early this morning, the Fed announced it would accept mortgage backed securities as collateral -- Fed Statement on Expansion of Securities Lending:
The Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. As is the case with the current securities lending program, securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27, 2008. The Federal Reserve will consult with primary dealers on technical design features of the TSLF.
As the Wall Street Journal explains:
By providing an outlet for those MBS, the program is meant to make dealers more comfortable buying and holding such securities which are now being dumped by investors facing margin calls and others nervous about the strength of Fannie Mae and Freddie Mac, the huge, privately-owned government-sponsored mortgage agencies that guarantee most MBS. The same logic prompted the Fed to vastly expand the size and term to maturity of its daily money market lending operations on Friday as well as its "Term auction facility" by which it lends directly to banks against a range of collateral.
As I noted in an earlier posting, the list of collateral the Fed will take as part of the standard discount window programs includes other asset-backed securities (ABS). But apparently the new TSLF is more limited. It will be interesting to see whether the TSLF gets expanding to include more ABS -- including intangible asset-backed securities.
Posted by Ken Jarboe at March 11, 2008 2:07 PM
Trackback Pings
TrackBack URL for this entry:
http://www.athenaalliance.org/mt/mt-tb.cgi/1841