Dodd-Frank News Center

Commercial Paper Funding Facility Examined

This story appeared in Bank Digest.

“The Commercial Paper Funding Facility illustrates how the Federal Reserve, as the lender of last resort in times of extreme market stress, directly assisted the broader functioning of financial markets beyond its traditional narrow focus on depository institutions,” according to New York Federal Reserve Bank Vice President Tobias Adrian and Research Officer Ernst Schaumburg. The authors examine the Commercial Paper Funding Facility as part of a series detailing the steps taken by the Fed in its role as “lender of last resort” during the 2007-2009 financial crisis. According to the post, at the height of the crisis, financial intermediation activities had virtually collapsed, and the Fed responded by creating liquidity facilities authorized under Section 13(3) of the Federal Reserve Act to address the “unusual and exigent circumstances.” These facilities provided last-resort lending options in strained markets to prevent stress in the financial sector from spilling over onto real economic activity, the authors note. 

Duke Discusses Community Stabilization

This story appeared in Bank Digest.

“[H]ousing alone is not sufficient to create sustainable and economically resilient communities,” stated Fed Governor Elizabeth A. Duke in remarks before the Community Stabilization Symposium, NeighborWorks Training Institute, National Harbor, Md., on Dec. 9, 2009. According to Duke, the Fed “is committed to continuing to identify ways in which our strengths as a research institution, combined with our network of Community Affairs outreach staff, can be leveraged to help communities recover from high numbers of foreclosures and related economic impacts.”

Fed Extends Length of Liquidity Programs, Reduces Size of Others

This story appeared in Bank Digest.

The Federal Reserve Board has announced extensions of and modifications to a number of its liquidity programs. The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) all have been extended through Feb. 1, 2010, as have been the temporary reciprocal currency arrangements (swap lines) between the Fed and other central banks. However, the Fed also has reduced the size of the Term Auction Facility and the TSLF, due to improving financial conditions and reduced need for the services. TAF auctions will have reduced offerings and TSLF auctions either will be suspended or reduced in size and frequency.

Fed Announces Rules Regarding AMLF

The Federal Reserve Board has announced two final rules pertaining to the Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF), which extends loans to banking organizations to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds.

The first rule provides a temporary limited exception from the Board's leverage and risk-based capital rules for bank holding companies and state member banks. The second rule provides a temporary limited exception from sections 23A and 23B of the Federal Reserve Act, which establish certain restrictions on and requirements for transactions between a bank and its affiliates.