Term Securities Lending Facility (“TSLF”) and Term Securities Lending Facility Options Program (“TOP”) (FRBNY)

Term Securities Lending Facility (“TSLF”) and Term Securities Lending Facility Options Program (“TOP”) (FRBNY)

Program was created in March 2008 and terminated on Feb. 1, 2010. At its peak, the TSLF & TSLF-TOP lent out $233.6 billion.

Funding agency and aid type
The funding agency was the Federal Reserve.

Purchasing GSE mortgage-backed securities from investors.

Background
SIGTARP: "“Term Securities Lending Facility (“TSLF”), and Term Securities Lending Facility Options Program (“TOP”) — Total Potential Support: $250 Billion. In the securities markets, primary dealers are a group of securities broker-dealers who specialize in Treasury and Federal agency debt, and who have the right to trade directly with the Federal Reserve System. They also participate directly in U.S. Treasury auctions. They are an important conduit for financial interactions between the Federal Government and the private markets. In early 2008, this dealer system was under increasing liquidity pressure, which the Federal Reserve addressed on March 11, 2008, with the establishment of a Term Securities Lending Facility (“TSLF”). According to the Federal Reserve Board’s February, 2009 Monetary Report to Congress, “Under the TSLF, the Federal Reserve lends up to $200 billion of Treasury securities to primary dealers for a term of 28 days (rather than overnight, as in the regular securities lending program); the lending is secured by a pledge of other securities.” The other securities that must be posted as collateral were broadened from the traditional eligible assets — Treasury and Federal agency securities, and AAA- rated private-label residential mortgage-backed securities (“RMBS”) — to include all investment-grade debt securities. TSLF makes securities available in weekly auctions. The program is scheduled to end on February 1, 2010. An extension of the TSLF is the TSLF Options Program (“TOP”), described by FRBNY as a program intended to “enhance the effectiveness of TSLF by offering added liquidity over periods of heightened collateral market pressures, such as quarter-end dates.” The program “offers options on a short-term fixed rate of [TSLF] bond-for-bond loan of general Treasury collateral against a pledge of eligible collateral.” FRBNY’s Open Market Trading Desk will offer a total of $50 billion in options for each targeted period. As of June 25, 2009, the TOP has been suspended, although the Federal Reserve states that it is prepared to resume TOP auctions “if warranted by evolving market conditions.”"

Via Prins: "“The TSLF is a 28-day facility that will offer Treasury general collateral (GC) to the Federal Reserve Bank of New York’s primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.”"

Via Prins: "“The System Open Market Account (SOMA) Term Securities Lending Facility Options Program (TOP) offers options to draw upon loans of U.S. Treasury securities from the SOMA portfolio in accordance with the program terms and conditions set forth in the Term Securities Lending Facility (TSLF) terms and conditions. TOP is currently suspended, but may resume if market conditions warrant.”"

Prins: "“The Term Securities Lending Facility offers Treasury collateral to the Federal Reserve Bank of New York so it can auction weekly loans to financial institutions. $25 billion in loans will be available between November 2009 and January 2010.”"

Prins: "“The Term Securities Lending Facility Options Program allowed primary dealers to get TSLF loans in exchange for collateral. At the time of the program's termination in June 2009, $50 billion in loans had been offered.”"

Related SourceWatch articles

 * SIGTARP Quarterly Report to Congress July 21, 2009
 * Troubled Asset Relief Program

External resources

 * FRBSTL accounting: http://www.research.stlouisfed.org/fred2/series/WTERMFAC
 * FRBNY homepage: http://www.newyorkfed.org/markets/tslf.html