Alert November 03, 2009

FRB’S Temporary Exemption from Section 23A Restrictions for Funding to Replace Tri-Party Repo Market Funding Expired on October 30, 2009

The FRB terminated the availability of its temporary exemption from the limitations of Section 23A of the Federal Reserve Act that had temporarily allowed all insured depository institutions to provide liquidity to their affiliates for assets generally funded in the tri-party repurchase agreement (“repo”) market.  The FRB instituted the temporary exemption on September 14, 2008 as a response to the financial crisis and to the weakness in the tri-party repo market.  The temporary exemption, which was extended on January 30, 2009 expired on October 30, 2009 and the FRB stated that, “the functioning of the tri-party repo market has improved considerably [since January 2009].”