Term Auction Facility ("TAF") (Fed)

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Term Auction Facility (“TAF”) (Fed)

TAF a vehicle for the Federal Reserve to make cash loans to banks at below-market rates when they put up collateral. The total credit extended to banks crested at $493.145 billion on Mar. 11, 2009. However, much of the funds were simply added to the banks’ reserves held at the Federal Reserve, rather than loaning out the funds.

Wall Street Bailout Accounting
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Balance Sheet
Disbursed*: $493.1B [1]
Current outstanding: $0B [2]
Public Funds
Maximum at-risk: $900B [3]
Current at-risk: $0[4]

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Federal Reserve.

Below-market cash loans to banks that put up collateral.

Who benefits




The total credit extended to banks crested at $493.145 billion on Mar. 11, 2009. On Feb. 17, 2010, $15.426 billion was still outstanding. In October 2008, the Federal Reserve expanded the program to a total potential credit pool of $900 billion. The program and the Federal Reserve says the program will be wound down in March 2010. The loans are offered at rates that are below-market (LIBOR).[5]


“Term Auction Facility (“TAF”) — Total Potential Support: Approximately $900 Billion. The Term Auction Facility (“TAF”) allows banks to borrow funds simply by putting up collateral. It is an alternative to the Federal Reserve’s discount window, which is the means by which banks have historically raised funds in an emergency. Because of its association with emergencies, borrowing at the discount window in the past has carried a certain stigma. TAF, by contrast, is an ordinary lending program, and its use is perceived less as a sign of weakness. TAF was created in December 2007 by the Federal Reserve Board of Governors to meet the short-term liquidity needs of banks. The Federal Reserve claimed that “by increasing the access of depository institutions to funding, the TAF has supported the ability of such institutions to meet the credit needs of their customers.” Technically, the funds are borrowed by banks in an auction that sets the interest rate. The bank must be in “generally sound financial condition,” and it must post collateral — such as high-quality notes — that are subject to certain haircuts. Thus, a bank may borrow, for example, $0.92 after posting $1.00 worth of securities. The minimum interest rate a bank may bid is the interest rate paid by the Federal Reserve on excess reserve balances. Typically, the Federal Reserve conducts regular auctions of 28- and 84-day funds for $150 billion at a time. Banks may not necessarily have been using the funds they have borrowed from TAF to make new loans to consumers. According to the Federal Reserve’s weekly statistical releases (Table Z.1 - Flow of Funds Accounts), the banks have, in aggregate, been adding the cash to their reserves at the Federal Reserve. See Figure 3.3 for a comparison of bank borrowings from the Federal Reserve (which are predominantly through TAF), versus the cash that the banks have placed as reserves at the Federal Reserve.”

Via Prins:[7]

“Under the Term Auction Facility (TAF), the Federal Reserve will auction term funds to depository institutions. All depository institutions that are eligible to borrow under the primary credit program will be eligible to participate in TAF auctions. All advances must be fully collateralized. Each TAF auction will be for a fixed amount, with the rate determined by the auction process (subject to a minimum bid rate). Bids will be submitted by phone through local Reserve Banks.”


“Under TAF, the Fed auctions short-term loans to financial institutions. The amount of loans offered has varied widely; between December 2009 and January 2010, $75 billion in loans will be available.”[8]

Articles and resources

Related SourceWatch articles


  1. Federal Reserve Bank of St. Louis, “Series: WTERAUC - Reserve Bank Credit - Term Auction Credit,” March 12, 2010.
  2. Federal Reserve Bank of St. Louis, “Series: WTERAUC - Reserve Bank Credit - Term Auction Credit,” May 13, 2010.
  3. Board of Governors of the Federal Reserve News Release, “Board announces that it will begin to pay interest on depository institutions' required and excess reserve balances,” October 6, 2008.
  4. Federal Reserve Bank of St. Louis, WTERAUC.txt “Series: WTERAUC - Reserve Bank Credit - Term Auction Credit,” June 18, 2010.
  5. Peter Eavis, “Why the Fed bailout may not work”, Fortune, Dec. 13, 2007, accessed Feb. 21, 2010.
  6. SIGTARP July 2009 report, p. 141-142.
  7. Board of Governors of the Federal Reserve System, “Board Announces That It Will Begin to Pay Interest on Depository Institutions’ Required and Excess Reserve Balances”, press release, October 6, 2008; Board of Governors of the Federal Reserve System, Term Auction Facility, (accessed September 10, 2009).
  8. Prins’ Mother Jones analysis. Dec. 21, 2009.

External resources

External articles

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