Primary Dealer Credit Facility
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In response to the subprime mortgage crisis and to the collapse of Bear Stearns, on March 17, 2008, the Federal Reserve started lending via the Primary Dealer Credit Facility (PDCF), whereby primary dealers can borrow at the Fed's discount window using several forms of collateral including mortgage backed loans. [1] The form of the loan is a repurchase agreement, or "repo," where the primary dealer sells a security to the Fed and agrees to buy it back at a later date (generally the next day) at a higher price that includes interest.
During the first three days the facility was open, an average of $13.3 billion was borrowed daily with $28.8 billion in loans outstanding.[2][3]
The facility will be open for at least six months,[4] and only be open to primary dealers who will operate through clearing banks.
[edit] References
- ^ Federal Reserve Bank of New York:Primary Dealer Credit Facility FAQ. Retrieved March 20, 2008
- ^ Forbes Thomson Financial News, Investors borrow 28.8 bln usd from Fed's new primary dealer credit facility, Retrieved March 20, 2008
- ^ The Wall Street Journal, Wall Street Taps Fed's New Loan Program, Sudeep Reddy, March 21, 2008, p. A3, accessed March 21, 2008
- ^ Board of Governors Press Release Retrieved March 20, 2008
