In April, 2007, New Century Financial Company, the second largest subprime lending institution in the United States, filed for bankruptcy protection as a symbol, and the American subprime mortgage crisis officially kicked off. Since then, the crisis has intensified, a large number of institutions engaged in subprime mortgage business have gone bankrupt, major financial institutions have suffered huge losses, and the international financial market has been violently turbulent. The market predicts that the global losses related to subprime loans will reach $65,438 +0.5 trillion. Since 2008, 13 commercial banks in the United States have gone bankrupt. Among the top five investment banks in the United States, Bear Stearns was acquired by JPMorgan Chase, Merrill Lynch was acquired by Bank of America, Lehman Brothers filed for bankruptcy protection, and Morgan Stanley and Goldman Sachs also became bank holding companies.

In response to the impact of the financial crisis, the U.S. Treasury and the Federal Reserve have successively issued a series of countermeasures, which are rare in the history of the United States since 100. Unconventional measures taken by the Federal Reserve to deal with the crisis

The large-scale credit crunch triggered by the subprime mortgage crisis in the United States has seriously hit market confidence. Although the Federal Reserve has continuously lowered the federal funds rate and rediscount rate, and applied the conventional monetary policy to the extreme, it still can't stop the violent turmoil in the international financial market and the sustained slowdown of the US economy. To this end, the Fed has to choose various unconventional measures to increase market liquidity supply, expand credit scale and restore market confidence.

(a) New liquidity management tools

The first is to adjust the discount window loan policy. Since August 2007, the Federal Reserve has repeatedly adjusted its discount policy to encourage commercial banks with financial difficulties to borrow from the Federal Reserve. On August 17, 2007, the Federal Reserve lowered its discount rate by 50 basis points, so that the difference between its interest rate and the US federal funds rate was reduced from the previous 100 basis point to 50 basis points, and the loan period was extended to 30 days, which can be extended upon request. On March 18, 2008, the Federal Reserve lowered its discount rate by 75 basis points again, further reducing its discount rate and federal funds rate to 25 basis points, and extending the loan period to 90 days. & lt/P & gt；

& ltP> The second is to launch a new financing mechanism. From June 5th to February 6th, 2007, the Federal Reserve launched the Innovative Financing Mechanism (TAF) for qualified deposit-taking financial institutions. In TAF, the Federal Reserve provides a 28-day mortgage through auction twice a month, and the interest rate is determined by the bidding process. Each TAF has a fixed amount, and the collateral is the same as the discount window loan. TAF is regarded as the greatest financial innovation of the Federal Reserve in recent 40 years, because it can effectively solve the liquidity problem in the interbank market by pre-determining the quantity and adopting market-oriented auction, without complicating the management of bank reserves and federal funds interest rates. On July 30, 2008, as a supplement to the 28-day TAF, the Federal Reserve launched the 84-day TAF to better alleviate the shortage of funds in the three-month short-term financing market. On September 29th, 2008, the Federal Reserve also indicated that it planned to launch two forward TAFs in 10, with a total amount of1150 billion. The time and duration will be determined after consultation with the depository to ensure that market participants have sufficient funds before the end of the year. Since then, the total scale has expanded to 300 billion on June 6, 2008.

The third is to activate the new securities lending mechanism. On March 1 1, 2008, the Federal Reserve launched another innovative liquidity support tool (TSLF). TSLF is an asset swap agreement, which is valid for 6 months. The Federal Reserve will replace the mortgage assets of the first-class securities firms with treasury bonds by auction and return them after the expiration. TSLF's counterparties are limited to primary securities dealers, mainly investment banks. Qualified mortgage assets that traders can provide include federal agency bonds and mortgage-backed securities and mortgage-backed securities (MBS) issued by federal agencies.

Fourth, the credit instrument for primary dealers (PDCF) was launched, and the discount window was opened to primary dealers. After the Bear Stearns incident, in order to further alleviate the short-term downward pressure on the financial market, on March 17, 2008, the Federal Reserve decided to use its emergency loan power to activate PDCF, essentially opening the discount window that was traditionally only open to commercial banks to eligible primary dealers (mainly investment banks) and providing overnight loans.

Fifth, asset-backed commercial paper, namely money market liquidity tool (AMLF), is introduced to support the commercial paper market by supporting the money market. On September 19, 2008, in view of the Wall Street shock caused by the collapse of Lehman Brothers, a large number of investors withdrew their funds from the money market, the Federal Reserve announced the launch of AMLF to provide non-recourse loans to savings institutions and bank holding companies at a discount rate for them to purchase asset-backed commercial paper (MMMF) from the money market. At the same time, the Fed also plans to purchase discounted bills issued by federal agencies such as Fannie Mae, Freddie Mac and the Federal Housing Loan Bank directly from primary dealers to further support the smooth operation of the commercial paper market. & lt/P & gt；

& ltP> VI is to launch the Commercial Paper Financing Tool (CPFF) to directly support the commercial paper market. 10 On June 7th, the Federal Reserve announced the creation of CPFF. The operation mechanism is to purchase three-month asset-backed commercial paper (ABCP) and high-rated unsecured commercial paper priced in US dollars directly from qualified commercial paper issuers through special purpose vehicles (SPV), and provide daily liquidity support for commercial paper issuers such as banks, large enterprises and local governments in the United States.

Seventh, pay interest to the reserves of commercial banks. For a long time, neither the Federal Reserve nor the central banks of other major countries have paid interest on the statutory deposit reserve and excess reserve of commercial banks. Under the impact of the subprime mortgage crisis, in order to increase the loanable funds of commercial banks, on June 6, 2008, 10, the Federal Reserve announced to pay interest on the statutory deposit reserve and excess reserve of commercial banks. Among them, the interest paid to the statutory reserve is 10 basis point lower than the average target interest rate of the federal funds during the reserve deposit period, and the interest paid to the excess reserve is initially set to be 75 basis points lower than the minimum target interest rate of the federal funds during the reserve deposit period. & lt/P & gt；

2) Direct assistance to financial institutions.