Dealer financial conditions and lender-of-last-resort facilities

Arbeitspapier

We examine the financial conditions of dealers that participated in two of the Federal Reserve's lender-of-last-resort (LOLR) facilities - the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) - that provided liquidity against a range of assets during 2008-09. Dealers with lower equity returns and greater leverage prior to borrowing from the facilities were more likely to participate in the programs, borrow more, and - in the case of the TSLF - at higher bidding rates. Dealers with less liquid collateral on their balance sheets before the facilities were introduced also tended to borrow more. There also appear to be some interaction effects between financial performance and balance sheet liquidity in explaining dealer behavior. The results suggest that both financial performance and balance sheet liquidity play a role in LOLR utilization.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 673

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Financial Institutions and Services: Government Policy and Regulation ; Central Banks and Their Policies ; Auctions
• Subject: lender of last resort ; central banking ; crises ; illiquidity ; insolvency ; stigma

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Acharya, Viral V. ; Fleming, Michael J. ; Hrung, Warren B. ; Sarkar, Asani
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/120782
• Last update: 10.03.2025, 11:42 AM CET