{"id":2574,"date":"2008-04-17T13:35:43","date_gmt":"2008-04-17T13:35:43","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2574"},"modified":"2025-03-27T15:48:37","modified_gmt":"2025-03-27T15:48:37","slug":"the-uks-new-swap-scheme-how-large","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2574","title":{"rendered":"The UK&#8217;s new swap scheme: how large?"},"content":{"rendered":"<p><a href=\"http:\/\/www.telegraph.co.uk\/money\/main.jhtml?xml=\/money\/2008\/04\/17\/cnbailout117.xml\" target=\"_blank\">Press reports<\/a> suggest that the planned facility to allow banks to swap mortgage assets for gilts could be as large as &pound;100 billion. If true, this would make it much more significant that the Federal Reserve&rsquo;s equivalent scheme &ndash; the <a href=\"http:\/\/www.newyorkfed.org\/markets\/tslf.html\" target=\"_blank\">term securities lending facility<\/a> (TSLF). <\/p>\n<p>The TSLF is currently capped at $200 billion, of which $100 billion had been used as of Wednesday 9 April. $200 billion is equivalent to 1.8% of the US broad money supply (expanded M2). The same percentage of UK broad money M4 would be &pound;29 billion. <\/p>\n<p>The UK scheme arguably needs to be larger because the Fed has introduced a range of other measures to help markets. Total Fed support amounts to $470 billion* or 4.1% of broad money. The equivalent UK sum would be &pound;69 billion. From this should be subtracted the &pound;25 billion of three-month funding the Bank of England has offered to banks against AAA-rated asset-backed securities. This suggests the UK swap facility should be &pound;44 billion to equate total UK and US support. (An <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2008\/4\/14\/how-big-is-the-mortgage-funding-gap.html\">earlier post<\/a> suggested additional aid of about &pound;40 billion was necessary to ease mortgage market strains.) <\/p>\n<p>Demands for a &pound;100 billion facility seem excessive. The success of the scheme will depend as much on the precise collateral rules and term of the swap as its size. <\/p>\n<h6>* Breakdown: TSLF $200 billion, term auction facility $100 billion, additional term repos $100 billion, swap facilities with ECB and Swiss National Bank $36 billion, primary credit discount window lending $7 billion (9 April), primary dealer credit facility lending $26 billion (9 April). <\/h6>\n","protected":false},"excerpt":{"rendered":"<p>Press reports suggest that the planned facility to allow banks to swap mortgage assets for gilts could be as large as &pound;100 billion. If true, this would make it much more significant that the Federal Reserve&rsquo;s equivalent scheme &ndash; the term securities lending facility (TSLF). The TSLF is currently capped at $200 billion, of which [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2574","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2574"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2574\/revisions"}],"predecessor-version":[{"id":4883,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2574\/revisions\/4883"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}