Responses to the Financial Crisis, Treasury Debt, and the Impact on Short-Term Money Markets

The United States introduced several programs in response to the financial crisis. We examine responses involving Treasury debt—the Term Securities Lending Facility (TSLF), Supplementary Financing Program (SFP), Treasury issuance, open-market operations—and associated impacts on collateralized funding markets. We find the TSLF uniquely effective, due primarily to its introduction during the financial crisis. We find some evidence that the SFP helped alleviate funding market stress. This is notable, as the SFP actually drained bank reserves. Our results show that the proper policy response to a financial crisis can involve options beyond an increase in the level of bank reserves.