The Fed’s Latest Scam: MMIFF
The Federal Reserve Board on Tuesday announced the creation of the Money Market Investor Funding Facility (MMIFF), which will support a private-sector initiative designed to provide liquidity to U.S. money market investors.
Under the MMIFF, authorized by the Board under Section 13(3) of the Federal Reserve Act, the Federal Reserve Bank of New York (FRBNY) will provide senior secured funding to a series of special purpose vehicles to facilitate an industry-supported private-sector initiative to finance the purchase of eligible assets from eligible investors. Eligible assets will include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less. Eligible investors will include U.S. money market mutual funds and over time may include other U.S. money market investors.
The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests and meet portfolio rebalancing needs. By facilitating the sales of money market instruments in the secondary market, the MMIFF should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments. Improved money market conditions will enhance the ability of banks and other financial intermediaries to accommodate the credit needs of businesses and households.
The attached term sheet describes the basic terms and operational details of the facility.
The MMIFF complements the previously announced Commercial Paper Funding Facility (CPFF), which on October 27, 2008 will begin funding purchases of highly rated, U.S.-dollar denominated, three-month, unsecured and asset-backed commercial paper issued by U.S. issuers, as well as the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), announced on September 19, 2008, which extends loans to banking organizations to purchase asset backed commercial paper from money market mutual funds. The AMLF, CPFF, and MMIFF are all intended to improve liquidity in short-term debt markets and thereby increase the availability of credit.
Money Market Investor Funding Facility (MMIFF) Terms and Conditions
Add:
Fed offers $540bn liquidity to money market funds
Revenge of the SIV
October 21st, 2008 at 9:55 am
when does it end? Sarkozy wants a soverign SIV fund to buy “cheap” equity. Ironic the WSJ has a front pager touting Volker being in Obama’s back pocket. Volker is no diffent than McCain, teo public servants well past their prime. WSJ touting how Volker will defent the dollar. highly ironic as the Treasury and Fed pump another stab wound into it with evry new “treatment.”
October 21st, 2008 at 10:52 am
They dont have the balance sheet capacity, do they? Is it back to Hank for another slug?
October 21st, 2008 at 10:55 am
Yes, back to Hank and t-bills buyers.
October 21st, 2008 at 11:02 am
Over/Under on the size of the balance sheet by mid ‘09; $2.5tn? $3tn?
It’s adding up pretty quick.
October 21st, 2008 at 11:18 am
The problem is not just the size but how are they going to get out of this. No exit strategy that I know of.
October 21st, 2008 at 12:56 pm
The “Son of Credit Crisis” looming is where the US falls into the trap that Japan has. Essentially the government borrowings become so large that interest rates can not be raised to normal (4% to 6%) range which a healthy economy requires. This is will be the government is unable to afford the interest on its debt and this forces the rates to remain below 1% for years or decades longer than necessary.
October 21st, 2008 at 12:58 pm
“This is because the government is unable to afford…
(sorry for incoherence – had some text over what I was typing!)
October 21st, 2008 at 4:22 pm
I chortled at your headline, but not the topic. You are dead right. Easy to get in, hard to get out, T-bill buyers fund it, and more bloat for the Fed’s balance sheet. I can’t imagine what the H.4 report will look like by year-end.
What a day to be traveling on business.
October 21st, 2008 at 4:30 pm
David: I suspect the t-bills buyers will soon have an indigestion…we will be close to a $3tn balance sheet at the end of the year.
October 21st, 2008 at 11:07 pm
Agree t-bill buyers are already having problems of their own
a. china bailing out agri bank or something
b. Indian govt saying “fiscal deficit” will widen ..need more cash
c. saudis are pissed off with oil price decline
When they head for the exits, it will be fun.
The question I have is : How soon will it happen ? Game theorists are busy by now ?