This is getting a little ridiculous. Apparently the Fed was not happy with the market reaction to its overture yesterday and so it has come back with a little more this morning.
The Fed has announced a new Term Auction Facility (TAF) program in which they will auction off funds at an interest rate to be determined by the auction. All parties eligible to borrow from the discount window will be eligible to participate and all collateral accepted at the discount window will be accepted (Dec 12 FOMC Press Release).
So, what this looks like to me is the Fed encouraging institutions to borrow at the terms available at the discount window, which I guess hasn’t been utilized to the extent they might have hoped.
It really isn’t that much, as far as I can tell, and I’m not sure the big move up this morning (S&P 2 Day Chart) is justified. The markets just seem to be happy that the Fed still cares and took notice of its temper tantrum yesterday.
Don’t you just love our capitalist system, so free of government intervention and manipulation!? Ahhh, the virtues of the free market.