Stimulus.org - Monetary Policy

Reverse Repurchase Agreement Program

Jason Peuquet — Tue, 09 Mar 2010 22:07:30 +0000

Date:

March 8, 2010

Policy Area:

Financial Sector Policy

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Other

Maximum Amount Special Symbol:

Amount Spent:

The New York Federal Reserve announced a new Reverse Repurchase Agreement Program to reduce some of the liquidity in financial markets. Under the program, the Fed will sell securities from it's portfolio with agreements to repurchase them at later dates. This is an additional sign of tightening from the Fed, in light of last month's increase in the discount rate from 0.5 to 0.75 percent.

The New York Fed originally announced this program in October 2009 in an operating policy statement, stating that they had been working internally on the operational details of repurcahses and reverse repurchases to make it a viable option for draining excess liquidity if the FOMC decided such a program should be used. In the statement, the Fed also announced that reverse repos are nothing new and have even "been in the Federal Reserve's toolkit for years, and the Federal Reserve has conducted them both as recently as December 2008."

Even though this can be interpretted as a method of tightening, the Fed's statement yesterday maintained that the announcement of this program should affect expectations on other monetary policy moves.

Source:

New York Fed Operating Policy Statement 10/19/2009

New York Fed Operating Policy Statement 3/8/2010

Notes:

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Supplemental Financing for IMF

Jason Peuquet — Thu, 01 Oct 2009 19:25:18 +0000

Date:

June 24, 2009

Who:

Treasury

Policy Area:

Monetary Policy

Economic Target:

Government and GSEs

Action Type:

Loans

Maximum Amount:

75000000000

Amount Spent:

75000000000

Deficit Impact:

4973000000

As part of the Supplemental Appropriations Act (H.R. 2346), signed into law on 6/24/2009, Congress and the President agreed to add $75 billion in Special Drawing Rights (SDRs) at the International Monetary Fund. The funds will remain "available until expended" to buffer the IMF's reserves.

Source:

Text of Supplemental Appropriations Act of 2009

Notes:

Deficit impact of $75 billion increase in SDRs is estimated to cost the U.S. government $4.973 billion.

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Foreign Currency Swap Lines

Maya MacGuineas — Fri, 10 Jul 2009 20:06:45 +0000

Foreign Currency Swap Lines

Date:

December 12, 2007

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Currency Swap

Maximum Amount:

286000000000

Amount Spent:

8071000000

Currency swaps between the Fed and other foreign central banks are intended to increase foreign currency liquidity and allow for the provision of U.S. dollar funding abroad.

Since December of 2007, the Fed has announced several new and expanded currency exchanges with numerous foreign central banks. The below currency swaps expired in February 2010. However, on May 9, 2010 the Fed reauthorized the use of foreign currency swap lines through January 2011 to help add liquidity to global markets following European debt fears.

Announced Date	Expired Date	Participating Foreign Central Banks	Maximum Authorized Amount
04/06/09	10/30/09	Eurozone, Japan, England, Switzerland	$286 billion
10/29/08	04/30/09	Brazil, Mexico, Korea, Singapore	$120 billion
10/28/08	04/30/09	New Zealand	$15 billion
09/29/08	04/30/09	Canada, England, Eurozone, Japan, Switzerland, Australia, Sweden, Norway, Denmark	$620 billion
09/26/08	09/29/2008*	Canada, England, Eurozone, Japan, Switzerland	$260 billion
09/24/08	09/29/2009*	Australia, Sweden, Norway, Denmark	$30 billion
09/18/08	09/26/2008*	Canada, England, Eurozone, Japan, Switzerland	$247 billion
07/30/08	09/18/08*	Eurozone, Switzerland	$67 billion
05/02/08	7/30/2008*	Eurozone, Switzerland	$62 billion
03/11/08	05/02/2008*	Eurozone, Switzerland	$36 billion
12/12/07	3/11/2008*	Eurozone, Switzerland	$24 billion

* "Expired date" indicates date that existing currency swap was superseded by new arrangement

Source:

See links within table for individual Fed releases on each action.

Fed Press Release December 12, 2007

Fed Press Release May 9, 2010

Notes:

Maximum amount is total amount of all unexpired swap arrangements. Amount spent is reported from Fed's balance sheet and current as of 1/16/2013. Maximum swap amounts are listed in dollar exchange rates current at the time the action was announced. Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

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Purchase of Long-Term Treasury Bonds

Maya MacGuineas — Fri, 10 Jul 2009 19:22:13 +0000

Purchase of Long-Term Treasury Securities

Date:

March 18, 2009

Policy Area:

Monetary Policy

Economic Target:

Government and GSEs

Action Type:

Other

Amount Spent:

1327687000000

On 3/19/2009 The Federal Open Market Committee announced that the Fed would purchase up to $300 billion in "longer term" Treasury securities. This would have the effect of driving down interest rates on these securities and various types of loans.

This action was taken in conjunction with the Fed's decision to increase its purchase of federal agency debt and mortgage-backed securites.

On 8/10/2010, the FOMC announced that it would take the proceeds from maturing agency debt and mortgage-backed securities and invest them in long-term Treasury bonds. The move would keep the balance sheet constant, rather than having it shrink as previously expected.

On 11/3/2010, the FOMC announced that it would make an additional purchase of $600 billion in longer-term Treasury securities, on top of the commitment made back in August. The two moves combined would result in the purchase of about $900 billion by the end of the second quarter of 2011.

Source:

Federal Reserve Open Market Committee Announcement 3/18/2009

Notes:

Maximum amount is currently unknown. Amount spent as of 1/23/2013 (http://www.clevelandfed.org/research/data/credit_easing/index.cfm). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

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Interest Rate Cuts: 4.25% to 3.5%

Maya MacGuineas — Fri, 10 Jul 2009 19:17:47 +0000

Date:

January 22, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

75 basis point reduction in federal funds rate

Source:

FOMC Jan. 22 Announcement

Notes:

Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node

Interest Rate Cut: 3.5% to 3%

Maya MacGuineas — Fri, 10 Jul 2009 19:14:57 +0000

Date:

January 30, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

50 basis point reduction in federal funds rate.

Source:

FOMC Jan. 30 Release

Notes:

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Interest Rate Cut: 3% to 2.25%

Maya MacGuineas — Fri, 10 Jul 2009 19:13:52 +0000

Date:

March 18, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

75 basis point reduction in federal funds rate.

Source:

FOMC March 18 Release

Notes:

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Interest Rate Cut: 2.25% to 2%

Maya MacGuineas — Fri, 10 Jul 2009 19:12:45 +0000

Date:

April 30, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

25 basis point reduction in federal funds rate.

Source:

FOMC April 30 Release

Notes:

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Interest Rate Cut: 2% to 1.5%

Maya MacGuineas — Fri, 10 Jul 2009 19:11:43 +0000

Date:

October 8, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

50 basis point reduction in federal funds rate coordinated with other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, Sveriges Riksbank and the Swiss National Bank.

Source:

FOMC Oct. 8 Release

Notes:

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Interest Rate Cut: 1.5% to 1%

Maya MacGuineas — Fri, 10 Jul 2009 19:10:20 +0000

Date:

October 29, 2008

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

50 basis point reduction in federal funds rate.

Source:

FOMC Oct. 29 Release

Notes:

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Supplemental Financing Program to Federal Reserve

suggp — Fri, 10 Jul 2009 18:37:13 +0000

Supplemental Financing Program

Date:

September 17, 2008

Who:

Treasury

Policy Area:

Monetary Policy

Economic Target:

Government and GSEs

Action Type:

Other

Maximum Amount Special Symbol:

Amount Spent:

5000000000

At the request of the Federal Reserve, The Treasury will market a separate, new line of Treasury bills (short term securities) to help fund the Federal Reserve's actions taken in response to the economic and financial crisis.

In a release on 2/23/2010, the Treasury announced that the Treasury will increase the balance of the program from the current $5 billion to $200 billion, a level maintained between February and September 2009.

Source:

Monthly Treasury Statement for March 2009

Treasury Release 2/23/2010

Treasury Release 9/17/2008

Notes:

Maximum amount is unlimited. Amount spent reflects value of bills outstanding as of 2/17/2010. Deficit impact unknown.

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Interest Rate Changes

suggp — Thu, 09 Jul 2009 19:26:02 +0000

Federal Funds Rate

Who:

Fed

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Economic Target:

Financial Institutions

Action Type:

Change in Interest Rate

The federal funds rate is the interest rate at which one bank lends money, available at the Federal Reserve, to another financial institution. It is determined by the Federal Open Market Committee (FOMC), which meets eight times per year in order to set monetary policy, review current economic conditions, determe risks to economic growth and fiscal sustainability, and adjust the federal funds rate. The FOMC comprises the seven member Fed Reserve Board of Governors, the president of the Federal Reserve Bank of New York, as well as four rotating members from the various regional Federal Reserve banks. Beginning in June of 2006, the FOMC began to lower interest rates from what was almost a five year high, at 5.25%. Since the financial crisis began however, the FOMC has continued to lower rates, finally reaching a floor of a floating rate between 0% and 0.25%.

Notes:

Since 12/16/2008 the federal funds rate has been a range between 0% and .25%. Since that date, the above graph displays the federal funds rate as the average of the range, or .125%. Federal funds rate historical tables can be found here.

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Secondary Credit

suggp — Thu, 09 Jul 2009 15:41:41 +0000

Secondary Credit

Policy Area:

Monetary Policy

Economic Target:

Financial Institutions

Action Type:

Loans

Maximum Amount Special Symbol:

Amount Spent:

Secondard credit is traditionally provided by the Fed to depository institutions that do not quality for primary credit to promote market stability and provide necessary liquidity. According to the NY Fed, it is available " to meet backup liquidity needs when its use is consistent with a timely return to market sources of funding or the orderly resolution of a troubled institution."

Along with primary and seasonal credit, this program makes up the Fed's "discount window."

Source:

NY Fed Information on Discount Window

Notes:

Maximum amount unlimited. Amount spent represents loans outstanding as of 7/14/2010 (http://www.federalreserve.gov/releases/h41/Current/). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.

Is not a top-level node