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An Empirical Analysis of the Feds Term Auction Facility, CATO Papers on Public Policy


The U.S. Federal Reserve used the Term Auction Facility to provide term funding to eligible depository institutions from December 2007 to March 2010. According to the Fed, the purpose of the TAF was to inject term funds through a broader range of counter parties and against a broader range of collateral than open market operations. The overall goal of the TAF was to ensure that liquidity provisions could be disseminated efficiently even when the unsecured inter - bank markets were under stress. In this paper I use the TAF micro-level loan data and find that about 60 percent of TAF loans went to foreign banks that pledged asset-backed securities as collateral for these loans. The data and analysis illustrate the major role that foreign in particular, European banks currently play in the U.S. financial system and the resultant currency mismatch in their balance sheets. The data suggest that foreign banks had to borrow from the Federal Reserve Bank to meet their dollar-denominated liabilities.




Efraim Benmelech

Date Published



Benmelech, Efraim. 2012. An Empirical Analysis of the Feds Term Auction Facility. CATO Papers on Public Policy.: 57-91.


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