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Dec 12 2007 1:45PM EST

The Fed's New Facility, Explained in English

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:

TAF is 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.)

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