Download this Paper Open PDF in Browser

Thawing Frozen Capital Markets and Backdoor Bailouts: Evidence from the Fed's Liquidity Programs

63 Pages Posted: 21 Sep 2014 Last revised: 24 Jul 2015

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business

Jean Helwege

UC Riverside

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Date Written: July 20, 2015

Abstract

During the subprime crisis, the Federal Reserve introduced several emergency liquidity programs as supplements to the discount window: TAF, PDCF, and TSLF. Using data on loans to large commercial banks and primary dealers, we find that the programs were used by relatively few institutions and had modest effects on the liquidity of short-term debt markets. Instead, our evidence suggests that the decision to borrow and to prepay loans was more closely related to each firm’s financial health. Our results suggest that healthy banks found the terms of the loans expensive relative to private market funds, while banks closer to insolvency generally did not.

Keywords: Frozen markets, liquidity, bailout, crisis

JEL Classification: G21, G24, G28

Suggested Citation

Boyson, Nicole M. and Helwege, Jean and Jindra, Jan, Thawing Frozen Capital Markets and Backdoor Bailouts: Evidence from the Fed's Liquidity Programs (July 20, 2015). Available at SSRN: https://ssrn.com/abstract=2498672 or http://dx.doi.org/10.2139/ssrn.2498672

Nicole M. Boyson

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4775 (Phone)

Jean Helwege (Contact Author)

UC Riverside ( email )

900 University Ave
Riverside, CA 92521
United States

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

44 Montgomery Street
San Francisco, CA 94104
United States

Paper statistics

Downloads
87
Rank
247,464
Abstract Views
394