By now, everyone has heard about the Feds raising the discount window rate from ½ to ¾ percent. There was a second decision revealed in the press release that received scant attention;
“In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds. Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.”
The Fed will no longer be a temporary dumping ground for dubious assets. The pawnshop window is closing.