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Articles 1 - 12 of 12
Full-Text Articles in Social and Behavioral Sciences
Lessons Learned: Lorie Logan, Mercedes Cardona
Lessons Learned: Lorie Logan, Mercedes Cardona
Journal of Financial Crises
Lorie Logan is executive vice president in the Markets Group of the Federal Reserve Bank of New York, the System Open Market Account (SOMA) manager pro tem for the Federal Open Market Committee (FOMC), and head of Market Operations, Monitoring, and Analysis (MOMA).
Lessons Learned: Donald Kohn, Maryann Haggerty
Lessons Learned: Donald Kohn, Maryann Haggerty
Journal of Financial Crises
Kohn, an economist, is a 40-year veteran of the Federal Reserve System. He served as a member of the Board of Governors, and was vice chair, from 2002-2010, which included the years of the global financial crisis (GFC).
Term Securities Lending Facility (Tslf) (U.S. Gfc), Manuel Leon Hoyos
Term Securities Lending Facility (Tslf) (U.S. Gfc), Manuel Leon Hoyos
Journal of Financial Crises
The 2007–09 financial crisis reached a critical stage in March 2008. Amid falling house prices and downgrades of mortgage-related securities, financial markets became severely disrupted. The Federal Reserve—the US central bank—became increasingly concerned about the inability of the 20 primary dealers, including the five largest US investment banks, to fund themselves in short-term funding markets, such as the repurchase agreement market, then estimated at $10 trillion. In response, the Fed created several emergency lending facilities to restore market liquidity that required the Fed to invoke Section 13(3) of the Federal Reserve Act. The Term Securities Lending Facility authorized the Federal …
The Federal Reserve’S Response To The 1987 Market Crash (U.S. Historical), Kaleb B. Nygaard
The Federal Reserve’S Response To The 1987 Market Crash (U.S. Historical), Kaleb B. Nygaard
Journal of Financial Crises
The S&P 500 lost 10% the week ending Friday, October 16, 1987, and lost an additional 20% the following Monday, October 19, 1987. The date would be remembered as Black Monday. The Federal Reserve (the Fed) responded to the crash in four distinct ways: (1) issuing a public statement promising to provide liquidity, as needed, “to support the economic and financial system”; (2) providing support to the Treasury securities market by injecting in-high-demand maturities into the market via reverse repurchase agreements; (3) allowing the federal funds rate to fall from 7.5% to 7.0% and below; and (4) intervening directly to …
Designing The Main Street Lending Program: Challenges And Options, William B. English, J. Nellie Liang
Designing The Main Street Lending Program: Challenges And Options, William B. English, J. Nellie Liang
Journal of Financial Crises
The Main Street Lending Program (MSLP) was established by the Federal Reserve to provide loans to small and mid-sized firms and large below-investment-grade firms that were financially sound before the onset of the COVID-19 pandemic. The program, which was established under the Fed’s Section 13(3) emergency authorities, is supported by capital from the U.S. Treasury and became operational in July 2020; however, utilization has been slight. We describe the economic challenges in designing a loan support program and evaluate the MSLP program in terms of how it manages significant asymmetric information, adverse selection, poor targeting, and moral hazard problems while …
The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the potential …
The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
During the summer of 2007, the U.S. residential mortgage market began to decline sharply negatively impacting the asset-backed commercial paper (ABCP) market, which often relied on mortgages as underlying support. Money Market Mutual Funds (MMMFs), significant investors in commercial paper (CP), quickly retreated from the market, causing a substantial decline in outstanding ABCP. In September 2008, pressures on the markets severely escalated again, when the Reserve Primary Fund MMMF “broke the buck” and prompted run-like redemption requests by many MMMF investors. These disruptions resulted in higher rates and shorter maturities, practically freezing the market for term CP. Concerned about the …
The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and utilization of these swaps …
The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick
The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick
Journal of Financial Crises
Beginning in the summer 2007 the Federal Reserve (the Fed) deployed numerous conventional and innovative programs to address the credit crisis occurring in the wholesale lending markets that was beginning to affect the broader financial markets and threaten the economy at large. Two of those programs, the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) were aimed at providing liquidity to primary dealers and required the Fed to rely on its authority under Section 13(3) of the Federal Reserve Act. Section 13(3) is a Depression Era amendment that permits the Fed expanded powers in “unusual and …
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007, the …
Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick
Guarantees And Capital Infusions In Response To Financial Crises C: U.S. 2009 Stress Test, Chase P. Ross, June Rhee, Andrew Metrick
Journal of Financial Crises
When President Obama took office in 2009, the Treasury focused on restarting bank lending and repairing the ability of the banking system as a whole to perform the role of credit intermediation. In order to do so, the Treasury needed to raise public confidence that banks had sufficient buffers to withstand even a very adverse economic scenario, especially given heightened uncertainty surrounding the outlook of the U.S. economy and potential losses in the banking system. The Supervisory Capital Assessment Program (SCAP)—the so-called “stress tests”—sought to rigorously measure the resilience of the largest bank holding companies. Those found to have insufficient …
Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick
Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick
Journal of Financial Crises
During 2008-09, the federal government extended multiple guarantee programs in an effort to restore the financial market and contain the panic and crisis in the market. For example, the Treasury provided a temporary guarantee program for the money market funds, the FDIC decided to stand behind certain debts and non-interest-bearing transaction accounts, and the Treasury, the FDIC, and the Federal Reserve agreed to share losses in certain assets belonging to Citigroup. This case reviews these guarantee programs implemented during the global financial crisis by the government and explores the different rationale that shaped certain design features of each program.