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Discussion Paper
A Closer Look at the Federal Reserve’s Securities Lending Program
Jake Schurmeier; Emma Weiss; Fleming, Michael J.; Keane, Frank M. (2016-08-17)
The Federal Reserve lends specific Treasury and agency debt securities held in its System Open Market Account (SOMA)—and accepts general Treasury securities as collateral—through its daily securities lending program. The program supports Treasury and agency debt market function by providing a secondary and temporary source of securities to the broader market through the Fed’s trading counterparties, the primary dealers. Importantly, the size and composition of the SOMA portfolio reflect past monetary policy decisions, limiting the program's ability to help alleviate all collateral ...
Liberty Street Economics , Paper 20160817

Working Paper
Raiders of the Lost High-Frequency Forecasts: New Data and Evidence on the Efficiency of the Fed's Forecasting
Chang, Andrew C.; Levinson, Trace J. (2020-10-23)
We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produces for Federal Open Market Committee (FOMC) meetings, our dataset has roughly weekly forecasts. We use these new data to study whether the staff forecasts efficiently and whether efficiency, or lack thereof, is time-varying. Prespecified regressions of forecast errors on forecast revisions show that the staff's ...
Finance and Economics Discussion Series , Paper 2020-090

Discussion Paper
Federal Reserve Liquidity Facilities Gross $22 Billion for U.S. Taxpayers
Abrahams, Michael (2012-11-07)
During the 2007-09 crisis, the Federal Reserve took many measures to mitigate disruptions in financial markets, including the introduction or expansion of liquidity facilities. Many studies have found that the Fed’s lending via the facilities helped stabilize financial markets. In addition, because the Fed’s loans were well collateralized and generally priced at a premium to the cost of funds, they had another, less widely noted benefit: they made money for U.S. taxpayers. In this post, I bring information together from various sources and time periods to show that the facilities ...
Liberty Street Economics , Paper 20121107

Working Paper
Let's Close the Gap: Revising Teaching Materials to Reflect How the Federal Reserve Implements Monetary Policy
Ihrig, Jane E.; Wolla, Scott A. (2020-10-23)
The topic of the Federal Reserve’s (the Fed’s) implementation of monetary policy has a significant presence in economics textbooks as well as standards and guidelines for economics instruction. This presence likely reflects the fact that it is the implementation framework that helps ensure that the Fed’s desired level of its policy interest rate is transmitted to financial markets, which helps it steer the economy toward the Congressional dual mandate of maximum employment and price stability. Over the past decade or so, the Fed has purposefully shifted the way it implements monetary ...
Finance and Economics Discussion Series , Paper 2020-092

Speech
Treasury Market Liquidity and Early Lessons from the Pandemic Shock
Logan, Lorie (2020-10-23)
Remarks at Brookings-Chicago Booth Task Force on Financial Stability (TFFS) meeting, panel on market liquidity (delivered via videoconference).
Speech

Working Paper
Even Keel and the Great Inflation
Consolvo, Victoria; Humpage, Owen F.; Mukherjee, Sanchita (2020-10-23)
During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage ...
Working Papers , Paper 202033

Discussion Paper
Securing Secured Finance: The Term Asset-Backed Securities Loan Facility
Caviness, Elizabeth; Sarkar, Asani (2020-08-07)
The asset-backed securities (ABS) market, by supporting loans to households and businesses such as credit card and student loans, is essential to the flow of credit in the economy. The COVID-19 pandemic disrupted this market, resulting in higher interest rate spreads on ABS and halting the issuance of most ABS asset classes. On March 23, 2020, the Fed established the Term Asset-Backed Securities Loan Facility (TALF) to facilitate the issuance of ABS backed by a variety of loan types including student loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA), ...
Liberty Street Economics , Paper 20200807

Discussion Paper
Explaining the Puzzling Behavior of Short-Term Money Market Rates
Martin, Antoine; McAndrews, James J.; Palida, Ali; Skeie, David R. (2020-08-24)
Since 2008, the Federal Reserve has dramatically increased the supply of bank reserves, effectively adopting a floor system for monetary policy implementation. Since then, the behavior of short-term money market rates has been at times puzzling. In particular, short-term rates have been surprisingly firm in recent months, despite the large increase in reserves by the Fed as a part of its response to the coronavirus pandemic. In this post, we provide evidence that both the supply of reserves and the supply of short-term Treasury securities are important factors for explaining short-term rates.
Liberty Street Economics , Paper 20200824

Journal Article
A History of Large-Scale Asset Purchases before the Federal Reserve
Chabot, Benjamin; Herman, Gabe (2013)
The authors find that between 1870 and 1913, large open market purchases of Treasury securities made by the U.S. Treasury Department narrowed the yield spread between Treasury bonds with high interest rate risk (the risk of an investment?s value changing on account of interest rate changes) and those with low interest rate risk.
Economic Perspectives , Issue Q IV , Pages 140-152

Discussion Paper
Did the Fed’s Term Auction Facility Work?
Sarkar, Asani; McAndrews, James J.; Wang, Zhenyu (2011-10-11)
The Federal Reserve introduced the Term Auction Facility (TAF) in December 2007 to provide term loans to banks during the recent financial crisis. In this post, we report on the effectiveness of the TAF during the early stages of the crisis. We find that the TAF was associated with a decrease in the “liquidity premium,” one component of a bank’s borrowing cost. In other words, the TAF worked as intended.
Liberty Street Economics , Paper 20111011

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