July 30, 2008 / 1:37 PM / 9 years ago

TIMELINE: Fed actions to boost liquidity

WASHINGTON (Reuters) - The U.S. Federal Reserve expanded its liquidity offerings on Wednesday to try to ease still strained financial markets.

The U.S. central bank said its Primary Dealer Credit Facility (PDCF) and its Term Securities Lending Facility (TSLF) will be extended through January 30. The PDCF was initially launched as a six-month measure in March in the wake of the near bankruptcy of Bear Stearns.

It also said that it will introduce 84-day Term Auction Facility (TAF) loans, which it said will complement its existing 28-day TAF loans. The Fed introduced the loans program to try to ease a credit crunch that policy-makers feel has shown only limited signs of easing.

In addition, the Fed increased its swap line with the European Central Bank to $55 billion from $50 billion.

Following are previous extraordinary steps the Fed has taken since August, when the credit crisis erupted:

July 13: The Fed authorizes government-sponsored entities Fannie Mae and Freddie Mac to borrow from its discount window as necessary for emergency funding. Any lending would be collateralized by U.S. government and agency securities. The Fed also agrees to take on a consultative role in setting capital requirements and financial safety and soundness standards for the two companies.

May 13: The Fed writes to Congress seeking immediate authority to pay interest on reserves held by banks at the Fed. The central bank says this move will contribute to the efficiency of the financial system.

April 9: The Fed says it is considering a plan in which the Treasury Department would borrow in excess of its requirements and deposit the surplus at the Fed. The central bank is also considering whether to issue debt under the Fed’s name and seek authority to immediately pay interest on commercial bank reserves.

March 24: Fed details its role in amended JPMorgan Chase & Co’s planned purchase of ailing investment bank Bear Stearns Cos. It says it will assume control of a portfolio of Bear Stearns assets valued at $30 billion, pledged as security. Any profit from the assets will accrue to the Fed, while JPMorgan will bear the first $1 billion of any losses. The Fed will finance the remaining $29 billion on a non-recourse basis to JPMorgan.

March 16: The Fed in a surprise move cuts the discount rate it charges on direct loans to banks and announces new lending program to provide credit to other big Wall Street firms. In addition, it increases the maximum maturity of discount rate loans to 90 days from 30 days. The actions are taken in concert with a decision to approve special financing to facilitate the purchase of Bear Stearns by JPMorgan Chase.

March 14: The Fed says it authorized JPMorgan Chase to borrow at the discount window on behalf of Bear Stearns, an emergency move last used in the Great Depression.

March 11: The Fed says it will accept a broader range of collateral, including home mortgages, in a new securities lending program. It says it would lend up to $200 billion to primary dealers, secured for 28 days, and accept federal agency home mortgage-backed securities and highly rated private mortgage-backed securities as collateral.

The action was coordinated with steps by the Bank of Canada, Bank of England, European Central Bank and Swiss National Bank. The Fed also says it increased existing currency swap lines with the ECB and SNB to up to $30 billion and $6 billion, respectively, and extended the term of those lines through September to help those central banks provide dollar liquidity in their markets.

March 7: The Fed says it will inject $100 billion into the banking system by increasing the size of its two term auctions of short-term funding and start a series of term repurchase transactions with primary dealers expected to be worth another $100 billion.

February 29: Fed announces two TAF auctions of $30 billion each in March. It says it intends to conduct auctions for as long as necessary to ease pressures in short-term funding markets.

February 1: Fed announces it will continue biweekly TAF auctions in February, holding the amount in each auction steady at $30 billion.

January 3: The Fed raises TAF auction amounts to $30 billion from $20 billion for each of the two auctions in January. The European Central Bank and the Swiss National Bank also offer dollar funds in conjunction with the Fed auctions.

December 12: As part of a global coordinated central bank effort, the Fed establishes the TAF to provide funds over a longer period to a wider range of banks to meet temporary shortages of funds. It also establishes foreign exchange swap lines with the ECB and SNB. The arrangements will provide up to $20 billion for the ECB and $4 billion for the SNB.

November 26: The Fed promises more than the usual year-end liquidity and says it will lift limits on how much can be lent to any one bank.

August 17: The Fed cuts the discount rate by a half percentage point and says it will act as needed to offset adverse effects on the economy arising from disruptions in financial markets.

August 10: In a rare statement, the Fed notes banks are experiencing unusual funding needs because of dislocations in money and credit markets and says it would provide funds as needed.

Compiled by Ros Krasny, Alister Bull and Emily Kaiser; Editing by Tom Hals

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