Term Auction Facility

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The program was first instituted on December 17, 2007. These auctions allow their participants to obtain ‘cheaper’ (vs. the central banks’ determined discount rate) funding. It is a program implemented by the US Federal Reserve which was set up to help create liquidity in short term funding markets in light of the recent global financial crash. Funding became scarce during the height of the global recession as banks scaled down their lending given the subject creditworthiness of the borrowers.

Under the program, the Fed, along with other central banks, auctioned off collateralized loans to banks who had sound financial standing. Through the TAF, financial institution can obtain 28-day and 35-day term loans through periodic auctions. As of now, the TAF remains to be a trial monetary tool.

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