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Responses To The Financial Crisis, Treasury Debt, And The Impact On Short-Term Money Markets

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Executive Summary

Several programs have been introduced by U.S. fiscal and monetary authorities in response to the financial crisis. The authors examine the responses involving Treasury debt-the Term Securities Lending Facility (TSLF), the Supplemental Financing Program, increases in Treasury issuance, and open market operations-and their impacts on the overnight Treasury general collateral repo rate, a key money market rate. The contribution is to consider each policy in light of the others, both to help guide policy responses to future crises and to emphasize policy interactions. Only the TSLF was designed to directly address stresses in short-term money markets by temporarily changing the supply of Treasury collateral in the marketplace.

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