(20 February 2008 – US) Banks in America are reportedly borrowing big from the U.S Federal Reserve in the past few weeks, using a new measure introduced by the Fed Reserve two months ago to help ease pressures of the credit crunch.The Financial Times has reported that the Fed’s Term Auction Facility (TAF) saw borrowing of nearly $50 billion of one-month funds from the Federal Reserve by mid-February.
The Federal Reserve’s Term Auction Facility (TAF) allows banks to borrow at relatively attractive rates against a wide range of their assets.
The report also suggested that the onset of extra borrowings from the Federal Reserve has caused concern in the financial sector because of the lack of transparency in government borrowings and the growing reliance on indirect forms of government support.