A European bank has under water treasuries. Fed accepts them at par and gives them dollars which they either lend or hand out when deposits are redeemed. This “swap line” lets Banks and foreign governments hold USTs with zero downside (nominal) risk, insuring US debt demand.
Discussion
Said another way - creating money out of thin air for every bank on planet earth.
Do you get DiMartino-Booth saying that's not liquidity but funding? Like, that's the same thing, no? What am I missing? Is she too smart by a half or am I not knowledge enough?
by buying the bonds at par, the facility is preventing the money supply (debt) from shrinking, so very QE like imo. “funding” for banks trading in bad assets and getting par value dollars for them (they would have otherwise gotten less dollars for them).
Exactly. And then consequentially not having to sell stuff or even buy things
The insatiable desire for US dollars