More Fed intervention in the markets just announced
"Since the coordinated actions taken in December 2007, the G-10 central banks have continued to work together closely and to consult regularly on liquidity pressures in funding markets. Pressures in some of these markets have recently increased again. We all continue to work together and will take appropriate steps to address those liquidity pressures.
"To that end, today the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing specific measures.
"The Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. As is the case with the current securities lending program, securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27, 2008. The Federal Reserve will consult with primary dealers on technical design features of the TSLF.
"In addition, the Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.
"The actions announced today supplement the measures announced by the Federal Reserve on Friday to boost the size of the Term Auction Facility to $100 billion and to undertake a series of term repurchase transactions that will cumulate to $100 billion."
Here is some more coverage on the Fed's move from the AP and Bloomberg.
UPDATE: If all this stuff confuses the heck out of you and you're looking for a clearer explanation of the meaning of this program, here's a good summary paragraph from the Wall Street Journal:
"As with related steps announced last Friday, the latest Fed moves won't result in a net increase in reserves or cash to the banking system, which would put downward pressure on the federal funds rate, which the Fed now targets at 3%. That rate is charged on overnight loans between banks. Rather, the steps simply swap one type of asset on the Fed's balance sheet -- Treasurys -- for another -- loans to banks and securities dealers, backed by a wide variety of collateral. In that way the Fed hopes it can surgically direct relief to the pockets of the financial market that need it most. That would lessen the pressure for more aggressive use of the blunter instrument of interest rate cuts, which carries with it the risk of inflaming inflationary psychology such as through a weaker dollar or higher commodity prices."