Treasury Creates New Temporary Financing Program

Acting at the behest of the U.S. Federal Reserve, the U.S. Department of the Treasury has put into effect–for the short term–a new program designed to provide a cash infusion for the Federal Reserve’s initiatives. The Supplementary Financing Program, announced today, will allow for the selling of a series of Treasury bills. The new financing vehicle is separate from the Treasury’s existing borrowing programs. “The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week,” the Treasury Department noted in a statement announcing the new program today. “To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.” T-Bills under the new Supplementary Financing Program will be sold in auctions governed by the department’s current auction guidelines. As per the department’s statement, the Treasury “will provide as much advance notification as possible regarding the timing, size and maturity of any bills auctioned.” According to an article by MarketWatch this afternoon, the Treasury Department issued $45 billion in 35-day cash management bills at a rate of 0.30 percent today. The Treasury Department’s new program comes on the heels of yesterday’s announcement that the Federal Reserve would rescue sinking insurance concern AIG with a life raft in the form of an $85 billion loan package. Investment bank Lehman Brothers filed for bankruptcy protection on Monday and the government took over control of mortgage lenders Fannie Mae and Freddie Mac last week.The banking crisis has, of course, a direct effect on the commercial real estate market. “Clearly, real estate capital and credit markets continue to face many challenges,” Jeffrey  DeBoer, president & CEO of Real Estate Roundtable, told CPN. “Hopefully, these actions will help restore investor confidence in the system and provide a path for moving forward in a positive way. We continue to explore policy issues and options with U.S. officials at every level and every forum possible. The key continues to be restoring investor confidence in commercial real estate markets–an asset class that remains fundamentally sound.”