Term Auction Facility (TAF)
The Term Auction Facility (TAF) is a Federal Reserve program that was created in December 2007 to provide liquidity to depository institutions. It is a tool used by the Federal Reserve to provide short-term loans to banks and other depository institutions. The TAF is designed to provide liquidity to the banking system by allowing depository institutions to bid competitively for term funds. The Federal Reserve auctions a predetermined amount of funds at a fixed rate, and the depository institutions bid for the funds. The Federal Reserve then awards the funds to the highest bidders.
History of the Term Auction Facility
The Term Auction Facility was created in December 2007 in response to the financial crisis of 2007-2008. The Federal Reserve wanted to provide liquidity to the banking system and to ensure that banks had access to the funds they needed to meet their obligations. The TAF was designed to provide short-term loans to banks and other depository institutions. The Federal Reserve auctions a predetermined amount of funds at a fixed rate, and the depository institutions bid for the funds. The Federal Reserve then awards the funds to the highest bidders.
Comparison of Term Auction Facility and Other Federal Reserve Programs
| Program | Interest Rate | Term |
|---|---|---|
| Term Auction Facility | Fixed | 7-28 days |
| Discount Window | Variable | Overnight to 90 days |
| Primary Credit | Variable | Overnight |
| Secondary Credit | Variable | Overnight |
Summary
The Term Auction Facility (TAF) is a Federal Reserve program that was created in December 2007 to provide liquidity to depository institutions. It is a tool used by the Federal Reserve to provide short-term loans to banks and other depository institutions. The TAF is designed to provide liquidity to the banking system by allowing depository institutions to bid competitively for term funds. The Federal Reserve auctions a predetermined amount of funds at a fixed rate, and the depository institutions bid for the funds. The Federal Reserve then awards the funds to the highest bidders. For more information about the Term Auction Facility, please visit the Federal Reserve website or the websites of other financial institutions.
See Also
- Discount Window
- Primary Credit
- Secondary Credit
- Federal Funds Rate
- Open Market Operations
- Interest on Excess Reserves
- Reverse Repurchase Agreements
- Term Deposit Facility
- Money Market Mutual Funds
- Federal Reserve System
