When I said
this morning that more details of the Fed’s Term Auction Facility would surely
emerge over the course of the day, I didn’t expect Steve Waldman to be the person
providing them. But I’m very glad he is. So stop whatever it is you’re doing,
and go read this:
a really, really big deal
Waldman here explains in plain English exactly how this facility works, and
why it’s so important.
The only thing which is still a bit unclear is exactly what kind of collateral
the Fed will or will not accept at this new window. Waldman says that it will
be "whatever it is private lenders are eschewing," and I’ve heard
elsewhere that the Fed might even start accepting things like subprime mortgages.
I doubt it will go that far, but I’d love to get some more clarity on just what
kind of collateral the Fed considers to be acceptable these days.
(Also worth reading: Everything
You Want to Know About Today’s Fed Move But Didn’t Know Who to Ask.)