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Technology Stocks : Discuss Year 2000 Issues -- Ignore unavailable to you. Want to Upgrade?

To: flatsville who wrote (8574)	9/8/1999 11:13:00 PM
From: C.K. Houston	Respond to of 9818

NY Fed Unveils New Open-Market Policies For Y2K Wall Street Journal - September 8, 1999 NEW YORK -- The Federal Reserve Bank of New York is adjusting its open-market operations to ensure there are enough funds in the banking system ahead of the year 2000. New measures, announced Wednesday, include expanding the range of securities the Fed will accept as collateral when conducting "repurchase" transactions with primary dealers as well as a permanent extension of the terms for those transactions to 90 days. The New York Fed is also establishing a so-called standby financing facility for primary dealers through the auction of options on overnight transactions for exercise on specific days in December 1999 and January 2000. All these moves are aimed at preventing cash and collateral shortages in the banking system in the fourth quarter. Some banking industry observers are worried that Y2K concerns will ramp up demand for cash as the new year approaches. The New York Fed manages U.S. banking system reserves, primarily through repurchase transactions. In such transactions, the New York Fed temporarily lends cash to primary dealer banks in exchange for Treasury securities as collateral. Primary dealers are authorized to trade directly with the Fed. Mortgage, Agency Bonds Added To Mix Under the new plan, the Fed will also accept pass-through mortgage securities of Ginnie Mae, Fannie Mae and Freddie Mac as collateral. The Fed will also begin accepting Strip securities of the U.S. Treasury as well as stripped securities of other government agencies, the New York Fed said Wednesday. Strips are Treasury bonds whose principal and interest components have been split into separate payment streams. The acceptance of a broader range of collateral is expected to begin in early October and has been approved to last through April 2000. The Federal Open Market Committee, which approved the changes at its Aug. 24 meeting, will review the new collateral arrangements before the current plan ends in April, the New York Fed said. To gain access to the expanded pool of collateral, the New York Fed will begin establishing custody arrangements with commercial banks to manage the clearing and settlement of collateral on a "tri-party" basis. The New York Fed will also now conduct repurchase transactions for up to 90 days. Previously, repurchase transactions had been limited to a maturity of 60 days. The change is permanent. The Fed is also offering a temporary standby facility through the auction of options on temporary transactions. The facility is intended to provide greater assurance that there will be sufficient depth and liquidity in short-term funding markets to permit the New York Fed and other market participants to undertake needed year-end adjustments in balance sheets through transactions in the financing markets, the New York Fed said. interactive.wsj.com [Fair Use: For educational purposes]