Securitization Markets and Central Banking: An Evaluation of the Term Asset-Backed Securities Loan Facility

42 Pages Posted: 17 Apr 2011

See all articles by Sean D. Campbell

Sean D. Campbell

Board of Governors of the Federal Reserve System

Daniel M. Covitz

Board of Governors of the Federal Reserve System

William R. Nelson

Board of Governors of the Federal Reserve System

Karen M. Pence

Board of Governors of the Federal Reserve System

Date Written: January 21, 2011

Abstract

In response to the near collapse of US securitization markets in 2008, the Federal Reserve created the Term Asset-Backed Securities Loan Facility, which offered non-recourse loans to finance investors’ purchases of certain highly rated asset-backed securities. We study the effects of this program and find that it lowered interest rate spreads for some categories of asset-backed securities but had little impact on the pricing of individual securities. These findings suggest that the program improved conditions in securitization markets but did not subsidize individual securities. We also find that the risk of loss to the US government was small.

Keywords: securitization, financial crisis, monetary policy, discount window, lender of last resort

JEL Classification: G01, G10, E52, E58

Suggested Citation

Campbell, Sean D. and Covitz, Daniel M. and Nelson, William Richard and Pence, Karen M., Securitization Markets and Central Banking: An Evaluation of the Term Asset-Backed Securities Loan Facility (January 21, 2011). FEDS Working Paper No. 2011-16, Available at SSRN: https://ssrn.com/abstract=1810021 or http://dx.doi.org/10.2139/ssrn.1810021

Sean D. Campbell (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Daniel M. Covitz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-5267 (Phone)
202-452-5295 (Fax)

William Richard Nelson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Karen M. Pence

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2342 (Phone)
202-728-5887 (Fax)

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