Overview

This section of the Board of Governors' website is an additional step following several that the Federal Reserve has taken in recent years to enhance transparency of monetary policy. Other actions have included: the issuance by the Federal Open Market Committee (FOMC) of a statement announcing and explaining its monetary policy decision immediately after each of its meetings; the FOMC's release of detailed minutes of its meetings three weeks after each meeting; the FOMC's publication of quarterly summaries of policymakers' economic forecasts; and, pursuant to the Emergency Economic Stabilization Act passed in October 2008, the Federal Reserve's issuance of regular reports to the Congress on each of its lending programs that rely on its authorities under section 13(3) of the Federal Reserve Act. In June of 2009, the Federal Reserve began publishing a monthly report on Credit and Liquidity Programs and the Balance Sheet. More recently, the Federal Reserve implemented new disclosure requirements as per the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

In light of improved functioning of financial markets, many of the new policy tools described in this section have expired or been closed. These include the Money Market Investor Funding Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The temporary liquidity swap arrangements between the Federal Reserve and other central banks were also terminated, in February 2010, but in May 2010 the dollar liquidity swap lines were re-established with some central banks, in response to the re-emergence of strains in short-term U.S. dollar funding markets.

This section serves, in particular, as a resource for describing the new policy tools that the Federal Reserve has implemented to address the financial crisis that emerged during the summer of 2007. Greater public understanding of these tools and their use can increase understanding of the measures implemented by the Federal Reserve--and the rest of the federal government--to strengthen financial markets and institutions and encourage a resumption of economic growth.

The Federal Reserve considers transparency about the goals, conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. The Federal Reserve Act sets forth the goals of monetary policy, specifically "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Financial stability is an important prerequisite for achieving those goals.

Transparency about monetary policy also helps promote the accountability of the Federal Reserve to the Congress and the public. Such accountability is especially critical when nontraditional policy tools--which are less familiar to the public than traditional policy tools--are employed.

This section of the site brings together information on the various Federal Reserve liquidity and credit facilities and greater background on the Federal Reserve's balance sheet. The links at the top of this page group this information as follows:

• Crisis response provides information about the Federal Reserve's strategy since the beginning of the financial crisis.
• Federal Reserve's balance sheet discusses the Board's weekly H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," which contains the Federal Reserve's balance sheet and related information.
• Federal Reserve System financial statements include annual financial statements for the individual Reserve Banks, the Board of Governors, Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and the Commercial Paper Funding Facility LLC.
• Federal Reserve liabilities discusses the key liabilities on the Federal Reserve's balance sheet, including currency and reserve balances.
• Recent balance sheet trends provides a graphical depiction of selected assets and liabilities of the Federal Reserve.
• Open market operations discusses this traditional policy tool, including its evolution during the financial crisis.
• Central bank liquidity swaps discusses the use of reciprocal currency arrangements with other central banks, in response to the global nature of the financial crisis.
• Lending to depository institutions discusses the primary, secondary, and seasonal credit facilities as well as the Term Auction Facility.
• Lending to primary dealers discusses the Primary Dealer Credit Facility and securities lending programs.
• Other lending facilities presents information about the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, and the Term Asset-Backed Securities Loan Facility.
• Support for specific institutions discusses special lending arrangements with specific institutions, including those with Bear Stearns and the American International Group.
• Collateral and rate setting provides details on eligible collateral for a number of lending facilities and a summary of the terms and conditions of the Federal Reserve's lending facilities.
• Risk management explains how the Federal Reserve manages the risk associated with various liquidity programs, and provides details on the rapid expansion of its balance sheet.
• Longer-term issues discusses some of the challenges the Federal Reserve will likely face in the future as the financial crisis evolves.
• Reports and disclosures provides information and links regarding Federal Reserve disclosure requirements, monthly reports, and reports to the Congress.
• Related resources provide links to other transparency-related information and resources.

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