How did the Fed do? : an empirical assessment of the Fed's new initiatives in the financial crisis

Facing the worst financial crisis since the Great Depression, the Federal Reserve (Fed) has responded with sweeping, unprecedented actions to aid a slowing economy and stimulate a frozen credit market. We focus on the policy changes instituted by the Fed and their wealth effects on banks, insurance companies, brokerage firms, savings and loans institutions and primary dealers. More specifically, we analyse the actions of the Fed that involved the modification of the terms on which financial institutions can borrow from the Discount Window (DW) and the creation of new liquidity enhancing facilities like the Term Auction Facility (TAF), the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF). We find that changes to the DW and the creation of a similar program, the TAF, had almost no effect on its intended beneficiaries - depository institutions. These results are consistent with Cecchetti (2009). Also, we find that new measures implemented by the Fed towards restoring the repurchase agreement market were well received by both depository institution and primary dealers.