The Federal Reserve's Financial Crisis Response B: Lending & Credit Programs for Primary Dealers

22 Pages Posted: 27 Jan 2016 Last revised: 9 Feb 2016

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: February 1, 2016

Abstract

Beginning in the summer 2007 the Federal Reserve (the Fed) deployed numerous conventional and innovative programs to address the credit crisis occurring in the interbank lending markets that was beginning to affect the broader financial markets and threaten the economy at large. Two of those programs, the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) were aimed at providing liquidity to primary dealers and required the Fed to rely on its authority under Section 13(3) of the Federal Reserve Act. Section 13(3) is a Depression Era amendment that permits the Fed expanded powers in “unusual and exigent” circumstances, which it had not invoked in 76 years. We discuss the TSLF and the PDCF and the impact that these programs had on the Fed’s efforts to combat the brewing crisis, to provide much needed liquidity to the primary dealers, and to help revive the interbank lending markets.

Keywords: Financial Crisis, Federal Reserve, Primary Dealers, Term Securities Lending Facility, Primary Dealer Credit Facility, SEction 13(3) FRA

JEL Classification: G01, G28, G23, G24

Suggested Citation

Wiggins, Rosalind and Metrick, Andrew, The Federal Reserve's Financial Crisis Response B: Lending & Credit Programs for Primary Dealers (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2723549 or http://dx.doi.org/10.2139/ssrn.2723549

Rosalind Wiggins (Contact Author)

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andrew Metrick

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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