$150 Billion and Counting: Federal Reserve Announces Another Increase In Its Treasury Auction Facility

Robert Wegner

The housing finance bailout continues. There’s obviously still quite a bit of junk paper out there. And the Fed is going to spread money everywhere, the U.S., the EU and Switzerland, in response.

From the Fed’s statement, today:

The Fed announced today an increase in the amounts auctioned to eligible depository institutions under its biweekly Term Auction Facility (TAF) from $50 billion to $75 billion, beginning with the auction on May 5. This increase will bring the amounts outstanding under the TAF to $150 billion.

Here’s the global angle to the junk buying binge:.

In conjunction with the increase in the size of the TAF, the Federal Open Market Committee has authorized further increases in its existing temporary reciprocal currency arrangements with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $50 billion and $12 billion to the ECB and the SNB, respectively, representing increases of $20 billion and $6 billion. The FOMC extended the term of these reciprocal currency arrangements through January 30, 2009.

And the Fed is going to allow even uglier junk to be used as collateral:

The FOMC authorized an expansion of the collateral that can be pledged in the Federal Reserve’s Schedule 2 Term Securities Lending Facility (TSLF) auctions.