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Tag Archives: Lender of Last Resort

Securing Secured Finance: The Term Asset-Backed Securities Loan Facility

Elizabeth Caviness and Asani Sarkar This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak. 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...

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How the Bank of Canada’s balance sheet went from $118 billion to $440 billion in eight weeks

Ever since the coronavirus hit, the Bank of Canada's balance sheet has exploded. In late February its assets measured just $118 billion. Eight weeks later the Bank of Canada has $440 billion in assets. That's a $320 billion jump! To put this in context, I've charted out the Bank of Canada's assets going back to when it was founded in 1935. (Note: to make the distant past comparable to the present, the axis uses logarithmic scaling.) The rate of increase in Bank of Canada assets far exceeds...

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Is Stigma Attached to the European Central Bank’s Marginal Lending Facility?

Helene Lee and Asani Sarkar The European Central Bank (ECB)’s marginal lending facility has been used by banks to borrow funds both in normal times and during the crisis that started in 2007. In this post, we argue that how a central bank communicates the purpose of a facility is important in determining how users of the facility are perceived. In particular, the ECB never refers to the marginal lending facility as a back-up source of funds. The ECB’s neutral approach may be a key...

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Measuring Trend Inflation with the Underlying Inflation Gauge

Marlene Amstad, Simon Potter, and Robert Rich Consumers, financial market participants, and policymakers are particularly interested in the trend, or persistent, component of inflation. But this variable is not observed, which has resulted in a variety of proposed proxy measures. Because each measure has its own strengths and weaknesses, a consensus about a preferred candidate has not emerged. Here, we introduce the Underlying Inflation Gauge (UIG) as a measure of trend inflation....

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Which Dealers Borrowed from the Fed’s Lender-of-Last-Resort Facilities?

Viral V. Acharya, Michael J. Fleming, Warren B. Hrung, and Asani Sarkar During the 2007-08 financial crisis, the Fed established lending facilities designed to improve market functioning by providing liquidity to nondepository financial institutions—the first lending targeted to this group since the 1930s. What was the financial condition of the dealers that borrowed from these facilities? Were they healthy institutions behaving opportunistically or were they genuinely...

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