Published Friday, February 29, 2008 by Mark Thornton
How does Bernanke jump-start the banking system? Bernanke decided that, instead of waiting for timid customers at the discount window, he would announce a series of auctions called Term Auction Facilities, or TAFs, where the high bidders would get the bank reserves. This maintains the bank's privacy, or at least reduces the onus of approaching the discount window, and it guarantees that new reserves will enter the system.
Some commentators say that the Fed has merely taking charge, rising to the occasion, and attempting to "shake it loose together." However, others would say this is all an act of desperation. If desperate circumstances call for such drastic actions, then Bernanke's actions — rather than words — indicates that we are in desperate circumstances. Stick around to find who's right and who's wrong.
(Original Text)
Bennie and the Monetary Jets (1.37 MB)