Home > Views > Blogs > Market Movers > New Fed Window Still Carries a Little Stigma
EMAIL
PRINT
RSS
SHARE
TEXT SIZE:
SHARE
Send a copy to me

Separate multiple email addresses (max 20) with commas.

0/1500

Main
Evelyn Davis and Rich Zannino: Frene...   Citi Bails In its SIVs
Dec 13 2007 6:05PM EST

New Fed Window Still Carries a Little Stigma

One way of looking at the Fed's new Term Auction Facility is that it's the discount window without the stigma. But stigma, it seems, is in the eye of the beholder, and Dean Baker, for one, still seems to think that borrowing from the TAF is a sign of weakness:

Those of us who think that Wall Street folks might not always be entirely honest, might suspect some insiders will trade stock based on the fact that they know certain banks have borrowed heavily through the TAF. This could allow for substantial profits at the expense of the outsiders who don't know about this borrowing.

I don't think this is realistic: TAF borrowings are likely to be at or very close to the Fed funds rate, and there's no stigma at all to participating in the Fed funds market.

All the same, it might well help if some of the larger, safer, and better-capitalized banks made their TAF borrowings public at the beginning of this new scheme – just to help dispel any lingering idea that it's designed only for banks in trouble.

See more in

Loading...

Add Your Comment

Required fields are marked with an asterisk (*)
Add a comment

Recent Blog Posts

Archive

Previous
Dec
2008
Next


Also in Portfolio.com
Most Read
Most Emailed
Recently Commented