As part of the gradual winding 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 has weakened in recent months as financial institutions' need for liquidity 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 and the latter would avoid the stigma institutions often encounter when they borrow from the discount window.