Treasury securities in exchange for even crappier paper:

From Excite Money / Briefing.com, perhaps also a reason for the second surge in the Dow today:

14:35 ET Dow +202.60 Nasdaq +36.41 S&P +21.77 [BRIEFING.COM] The major indices climb to their best levels of the session. The New York Fed has announced modifications to its new Term Securities Lending Facility (TSFL). The TSFL auctions will now allow schedule 2 collateral, instead of the schedule 1 collateral previously proposed. Schedule 2 collateral will now include collateralized mortgage obligations (CMOs) and AAA rated commercial mortgage-backed securities

In other words, the Fed will be lending banks highly liquid Treasury securities in exchange for less liquid assets. Banks will now be able to use a wider range of collateral than previously announced. The first auction will take place on March 27.

posted by Quiddity at 3/20/2008 12:06:00 PM