WASHINGTON — As part of the gradual wind down of its emergency lending, the Federal Reserve Board said Friday that its cash auctions would be reduced to $75 billion in September, from $100 billion.
Demand for loans from the Term Auction Facility have weakened in recent months as the need for liquidity at financial institutions has lessened. A $100 billion auction held on Aug. 24 attracted $73.4 billion in bids.
The TAF was one of the first facilities the Fed created in 2007 to respond to the emerging financial crisis. The idea was that the Fed could lend to banks but avoid the stigma institutions often encounter when they borrow from the discount window.
Most of the Fed's other liquidity programs, including its Treasury auction and support for investment banks and money market mutual funds are slated to expire on Feb. 1. The Term Asset-Backed Securities Loan Facility will accept loans requests backed by asset-backed securities or legacy commercial-mortgage backed securities through March 31. Newly issued CMBS can use the Talf through June 30.
