Subprime Crisis : Corrective Measures
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The Federal Reserve took corrective measures to expand its balance sheet through various programs to provide liquidity to financial markets and institutions during the subprime crisis because the economy was weak and inflation was low. These emergency programs would need to be unwound when the economy recovers to prevent inflation, by raising interest rates and reducing the money supply. The document then lists the specific programs launched by the Fed to provide liquidity to banks, depository institutions, financial institutions, investors, borrowers, and to assist troubled institutions like Bear Stearns and AIG.
Subprime Crisis : Corrective Measures
- 2. Corrective Measures Expansion of the Fed balance sheet was necessary "...because our economy is very weak and inflation is very low. When the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation.
- 3. 01 Banks, Depository Institutions and Financial Institutions Traditional Discount Window Term Auction Facility (TAF) Primary Dealer Credit Facility (PDCF) Term Securities Lending Facility (TSLF) Currency swap agreements (Dollar Swap Lines)
- 4. Investors and Borrowers Commercial Paper Funding Facility (CPFF) Asset backed Commercial Paper Money Market Mutual Fund (AMLF) Term Asset-Backed Securities Loan Facility (TALF)
- 5. Assistance to Institutions Bear Stearns, JP Morgan Chase, and Maiden Lane LLC American International Group