The purchase of short-term securities by the Fed is a
? monetary policy, one that the central bank uses when interest rates are
zero.
During the 2008 credit crisis, the Federal Reserve created a term asset-backed security loan facility (TALF) that
bonds backed by consumer loans, credit card loans, and automobile loans. Because investors were concerned about consumers
?market became inactive. Consequently, financial institutions stopped making consumer loans. The
defaulting on these loans, the
TALF provided loans to institutional investors that
to
? these types of loans. In this way, the Federal Reserve engaged in
liquidity in the market for these securities.
