Publications

Central Banker | Winter 2008

Tools

Use These Guidelines if You’re Interested in Using Covered Bonds

During the summer, the U.S. Treasury and Fed introduced the covered bond framework to encourage additional sources of financing within the mortgage market and strengthen financial institutions.

A covered bond is a secured debt instrument that provides funding to a depository institution, collateralized by high-quality mortgage loans that remain on the issuer’s balance sheet. The Treasury, Federal Reserve, FDIC, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Securities and Exchange Commission collaborated to create a best practices guide for covered bonds.

See the press releases if you’re interested in beginning a covered bond program at your institution. Also see Fed Gov. Kevin Warsh’s remarks on the covered bond framework.

Follow Major Federal Reserve Actions

The Fed now pays interest on depository institutions' required and excess reserve balances; there is now a Commercial Paper Funding Facility; the Fed lends billions of dollars to AIG—but not Lehman Brothers; and Freddie Mac and Fannie Mae are now in conservator status.

Are you keeping it all straight?

With major Federal Reserve actions, economic decisions and related events coming in a flurry since late summer, the Board of Governors created a comprehensive web page encompassing all of the news and decisions. Here, you’ll find links to press releases, Federal Register notices, relevant speeches and congressional testimony, and other related information. Materials are organized by date.

Treasury Can Authorize Early Redemption and ACH Files Delivery

In late August and early September, the U.S. Department of the Treasury took unusual efforts to ensure that individuals in areas affected by hurricanes Gustav and Ike were able to receive their federal benefit payments early.

The postal service delivered checks early in areas affected by evacuation orders, and ACH files were delivered early to financial institutions in those areas. In addition, financial institutions in affected areas also were authorized to redeem EE and I savings bonds less than one year old presented from September 2008 through November 2008.

Treasury hoped to ensure that those facing hardships from the hurricanes did not face the additional hardship of being unable to access their funds when they were needed.

Announcements of this nature can be found at www.frbservices.org under the Treasury Services heading.

More Term Auction Facility Funds Available to Discount Window Borrowers

To address the disruptions in the financial markets, the Federal Reserve has enhanced its funding support for financial institutions, including expansion of the Term Auction Facility (TAF).

On Oct. 6, the Board of Governors announced that the sizes of both 28-day and 84-day TAF auctions would be boosted to $150 billion each. These increases will eventually bring the amounts outstanding under the regular TAF program to $600 billion. In addition, forward TAF auctions were conducted in November to extend credit over year-end. The size of these auctions totaled $150 billion each, so that $900 billion of TAF credit will potentially be outstanding over year-end.

For further information regarding TAF auctions, contact our discount window staff at 314-444-8444 or toll-free at 866-666-8316 or visit the Federal Reserve discount window web site.