Are the Bailouts of Wall Street Complements or Substitutes?
University of Louisiana at Lafayette - College of Business Administration
Wilfrid Laurier University
affiliation not provided to SSRN
March 21, 2012
Midwest Finance Association 2013 Annual Meeting Paper
The Term Securities Lending Facility (TSLF) lent $2.3 trillion worth of general collateral to eighteen investment houses in exchange for riskier securities. Treasury collateral was in high demand in 2008 and 2009 as repo markets shunned lower quality collateral. This paper finds a negative and significant relationship between participating in the TSLF and having funds from the Troubled Asset Relief Program (TARP) and other Federal Reserve lending programs. Thus, it appears that the TSLF was a substitute for other bailouts. In addition, dealers with higher paid CEOs were more likely to borrow in the next TSLF auction cycle.
Number of Pages in PDF File: 33
Keywords: bailout, Capital Purchase Program (CPP), CEO pay, Dodd–Frank emergency lending, Federal Reserve, financial crisis, general collateral, investment banks, primary dealers, repos, section 13(3), securities dealers, Troubled Asset Relief Program (TARP), Term Securities Lending Facility (TSLF)
JEL Classification: G01, G18, G2, G24, G28
Date posted: March 24, 2012 ; Last revised: September 3, 2012