Fed announces broadened collateral at the PDCF and TSLF

By: • Mon, Sep 15 2008, 9:25 AM

The Federal Reserve announced several initiatives on Sunday, including "enhancements to its existing liquidity facilities."

In the Federal Reserve's press statement, Chairman Ben Bernanke said the steps will "mitigate the potential risks and disruptions to markets."

The collateral has been broadened at the Primary Dealer Credit Facility (PDCF) and also at the Term Securities Lending Facility (TSLF).

At the PDCF, collateral has been broadened to "match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks," said the release.

The TSLF now includes investment-grade debt securities for Schedule 2 auctions. "Previously, only Treasury securities, agency securities, and AAA-rated mortage-backed and asset-backed securities could be pledged."

Schedule 2 TSLF auction will now occur every week, and not bi-weekly. Amounts offered will be increased to $150 billion from $125 billion. Amounts for Schedule 1 auctions will remain the same.