Financial Update (Second Quarter 2009)

Updates on Liquidity Programs, Proposed Revisions to CRA Among Recent Federal Reserve Actions

Federal Reserve actions updateThe introduction of a monthly report about the Fed's credit and liquidity programs, proposed revisions to the Community Reinvestment Act, and extensions and modifications to some liquidity programs are among recent actions taken by the Federal Reserve.

  • In early June, the Fed outlined the criteria it will use to evaluate applications to redeem U.S. Treasury capital from the 19 banking organizations that participated in the Supervisory Capital Assessment Program, or "stress tests." These criteria include determining that a bank holding company can facilitate lending to creditworthy households and businesses, maintain capital levels that are consistent with supervisory expectations, and meet its funding requirements while reducing reliance on government capital.

  • On June 10, the Fed issued the first of its monthly reports intended to provide new information about its credit and liquidity programs. The report, titled "Federal Reserve Credit and Liquidity Programs and the Balance Sheet," makes public a wide range of data concerning borrowing patterns and collateral. For many of the Fed's credit and liquidity programs, the new information in the report includes the number of borrowers and borrowing amounts by type of institution, collateral by type and credit rating, and data on the concentration of borrowing.
    Information about applications to redeem U.S. Treasury capital off-site image
    "Federal Reserve Credit and Liquidity Programs and the Balance Sheet" (June report) off-site image
    Federal Register notice about proposed CRA revisions off-site image
    Information about extensions, modifications of liquidity programs off-site image

  • The federal bank and thrift regulatory agencies have proposed revisions to regulations implementing the Community Reinvestment Act (CRA) that would require the agencies to consider low-cost education loans to low-income borrowers when assessing a financial institution's record of meeting community needs. The proposal would also incorporate into the CRA rules language that would allow the supervisory agencies, when assessing an institution's record, to consider capital investments, loan participation, and other ventures by nonminority- and nonwomen-owned financial institutions in cooperation with minority- and women-owned institutions and low-income credit unions.

  • Some of the Fed's liquidity programs, designed to restore health to strained credit markets, have undergone some extensions and modifications. Specifically, the Fed's Board of Governors extended the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF) through Feb. 1, 2010. The Term Asset-Backed Securities Loan Facility (TALF) remains set to expire on Dec. 31, 2009. The Term Auction Facility (TAF) does not have a fixed expiration date. The Fed is also trimming the size and changing the terms of some of these programs.

June 30, 2009