The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
In August of 2007, banks faced a freeze in funding liquidity from the asset-backed commercial paper (ABCP) market. We investigate how banks scrambled for liquidity in response to this freeze and its implications for corporate borrowing. Commercial banks in the United States raised deposits and took advances from Federal Home Loan Banks (FHLBs). In contrast, foreign banks – with limited access to the deposit market and FHLB advances – lent less in the overnight interbank market and borrowed more from the Federal Reserve’s Term Auction Facility (TAF) auctions. Relative to before the ABCP freeze and relative to their non-U.S. dollar lending, foreign banks with ABCP exposure charged higher interest rates to corporations for syndicated loan packages denominated in dollars. The results point to a funding risk in global banking, manifesting as currency shortages for banks engaged in maturity transformation in foreign countries.