I think a lot of people underestimate just how much liquidity is being pumped into the system. The TAF auction is independent from the TSLF, Primary Dealer Credit, and Discount Window borrowings. It is essentially cash (not t-bills, actual cash) in exchange for subprime paper at face value for 28-days. It is held-bi-weekly. Just some numbers from the TAF December 07 - $40 billion @ 4.6% January 08 - $60 Billion @ 3.1% February - $60 Billion @ 3% March - $100 Billion @ 2.6% April - $100 Billion @ 2.8% May - $150 Billion @ 2.1% June - $225 Billion* @ 2.3% June's number is higher because there are 3 auctions that month. All the rest had 2. There is currently $150 billion in cash outstanding at around 2.3%. Fed is getting paid $288 million in interest every month when the loans mature and roll over. I'll also do the TSLF lending just for the heck of it. This is where subprime paper can be exchanged at face value for T-Bills and Notes for 28-days. The Fed charges an upfront fee as interest. March 08 - $75 Billion @ 0.33% April 08 - $143 Billion @ Between 0.1% and .25% May 08 - $122 Billion @ Between 0.1% and .25% June 08 - $104 Billion @ Between 0.1% and .25% One thing I just noticed. The Fed is making an incentive for companies to buy subprime shit so they can trade it into the fed for cheap access to T-Bills for 28-days. There seems to be decling loan amounts month after month so it looks like this term facility may be a dud.
IMHO, TAF Loan limits are going to increase to $100 billion bi-weekly auctions in the very near future. TSLF will probably be tweaked from 28-day to 60 or 90-days so the banks can get quarterly interest payments from the bonds. Demand for this facility will then soar. But who knows.