At the conclusion of the recent December 16th FOMC meeting, the Federal Reserve re-confirmed the planned maturities of several emergency liquidity programs created to combat the recent financial difficulties.
Back in June of this year, the Fed outlined it's expectation that a number of the liquidity programs would be terminated in the first quarter of 2010. Given the improvement in the U.S. economy since that time, the Fed is continuing with its plan to wind these programs down.
The programs being discontinued include the following:
- Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)
The Fed created the AMLF to be a lending facility that provides funding to U.S. depository institutions and bank holding companies to finance their purchases of asset-backed commercial paper (ABCP) from money market mutual funds. Originally scheduled to mature on January 30, 2009, the program was extended a number of times with a final maturity of February 1, 2010.
- Commercial Paper Funding Facility (CPFF)
The Fed created the CPFF to provide a liquidity backstop to U.S. issuers of commercial paper (CP). Originally scheduled to cease purchasing CP on April 30, 2009, the maturity of the program was extended to February 1, 2010.
- Primary Dealer Credit Facility (PDCF)
The Fed created the PDCF as an overnight loan facility that provides funding to primary dealers in exchange for a specified range of eligible collateral. Like the AMLF, it was originally schedule to mature on January 30, 2009 and like the AMLF was extended a number of times to a final maturity of February 1, 2010.
- Term Securities Lending Facility (TSLF)
The TSLF is a weekly loan facility that promotes liquidity in Treasury and other collateral markets. The program offers Treasury securities held for loan over a one-month term against other program-eligible general collateral. Securities loans are awarded to primary dealers based on a competitive single-price auction. Originally scheduled to mature on January 30, 2009, it was subsequently extended until February 1, 2010.
In addition, the Fed updated its plans on several other liquidity programs.
The Fed is also working with other central banks to close temporary liquidity swap arrangements by February 1, 2010.
The Fed will continue with its plan to purchase $1.25 trillion of mortgage-backed securities (MBS) and $175 billion of federal agency debt. It is expected that these actions will be completed by the end of March 2010.
- Term Auction Facility (TAF)
Under the TAF, the Fed auctions term funds to depository institutions. All depository institutions that are eligible to borrow under the primary credit program will be eligible to participate in TAF auctions. All advances must be fully collateralized. There is no set maturity for this program, but it is expected to be scaled back in 2010.
- Term Asset-Backed Securities Loan Facility (TALF)
The Fed created the TALF to be a funding facility that would help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities (ABS) collateralized by loans of various types to consumers and businesses of all sizes. The anticipated expiration dates remain set at June 30, 2010 for loans backed by new-issue commercial mortgage- backed securities and March 31, 2010, for loans backed by all other types of collateral.