7/31/2019 Winding Down - A visual review of the lending facilities created by the Federal Reserve during the credit crisis

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Winding Down Financial Graph & Artwww.financialgraphart.com

Oct 31, 2012

John Paul Koning

Source: Federal Reserve. Last data point is August 2012. Amounts are in billions of dollars

A visual review of the lending facilities created by the Federal Reserve during the credit crisis

$200

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$1800

2008 2009 2010 2011 2012

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1211

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2008 09 10 11 120

100

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$600

2008 09 10 11 12 2008 09 10 11 12 2008 09 10 11 12

0

$40

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$150

Central bankliquidity swaps

Term Auction Facility(TAF)

Commercial Paper Fund-ing Facility (CPFF)

Discount lending

Maiden Lane LLC Maiden Lane II LLC Maiden Lane III LLC AIA and ALICO holdings

Term Asset-Backed Secu-

rities Loan Facility (TALF)Lending to American

International Group

Primary Dealer

Credit Facility

ABCP MMMF Liquid-

ity Facility (AMFL)

1 2 3 4

5 6 7 8

9 121110

1 Central bank liquidity swaps initially expired in early 2010, but were reactivated in

May 2010, and again in November 2011 to deal with credit market tightness.2. The TAF auctioned credit to depository institutions on a collateralized basis for pe-

riods of 28 and 84-days.

3. The Federal Reserve lent to CPFF LLC so that the CPFF could purchase three

month unsecured as well as asset-backed commercial paper from eligible issuers

4. Discount window lending is the traditional means by which the Federal Reserve

lends to depository institutions. Usually provided on an overnight basis, terms were

stretched to 30-days during the crisis. Unlike TAF, discount loans are provided not by

auction, but at a penalty to the market rate

5. The Federal Reserve created and lent to Maiden Lane LLC so it could purchase cer-

tain assets of Bear Stearns so as to facilitate the purchase of Bear Stearns by JP

Morgan

6. The Federal Reserve created and lent to Maiden Lane II LLC so it could purchase

residential mortgage backed securities from American International Group (AIG).

7. The Federal Reserve created and lent to Maiden Lane III LLC so it could purchase

collateralized debt obligations on which AIG Financial Products had written credit de-

fault swaps.8. The Federal Reserve received an interest in the common stock of two AIG insur-

ance subsidiaries, American International Assurance Company Ltd. (AIA) and Ameri-

can Life Insurance Company (ALICO). In exchange, the outstanding loans to AIG (12)

were reduced by $25 billion.

9. TALF lent for terms of up to five years, accepting as collateral asset-backed securi-

ties secured by student loans, auto loans, credit card loans, or small business loans

10 The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

lent to depository institutions so they might finance purchases of commercial paper

held by money market mutual funds

11 The PDCF provided overnight funds to primary dealers on a collateralized basis

12 The Federal Reserve opened a line of credit for AIG. This was in part reduced by

the creations of Maiden Lane II and III, and the transfer of AIA and ALICO