credit crisis still present as measured by TAF

There once were some bankers from Gaff
Whose products were layered with math.
With assets worth billions
Now stated in millions,
Those chaps were too clever by half!

Mark Sniderman – Cleveland Federal Reserve Bank

There are more write-downs by financial institutions from the subprime area, so the credit crunch is far from over. The markets have to clear and that cannot happen if there are continued changed in the value of the holdings.

We are also seeing the continued use of Term Auction Facility (TAF) which means that banks have a need for short-term financing at inexpensive cost. The latest auction saw more bids almost 2 times the $30 billion of funds in the facility. While the economics of using the facility makes sense, the fact that the facility is still needed suggests that there is still strain in the banking system.