The Term Facility Auction: Short and Sweet Explainer Version

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Just in case you need the summary version of our earlier post on the new Term Facility Auction, here’s a quick bullet point list of the highlights.
•The Fed will inject $40 billion into the markets in four auctions.
•Banks bid on what interest rate they will pay, which is effectively capped by the discount rate.
•Fed is taking a wider variety of paper, including CDOs and asset backed securities for which no market price is available.
•But they won't take already downgraded, junk CDOs that aren’t trading anywhere.
•The point of this is to make a market—or provide liquidity to the market—in CDOs and other recently illiquid assets. People have begun to call it a "bailout."
•Full list of collateral values is available here.

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