Results of the Federal Reserve's weekly opening of its Term Auction Facility, the facility the Fed created last December to auction loans to depository institutions, were intriguing, indicating that for the first time since the facility was created fewer dollars were taken by banks than the Fed was offering.
Today's results were for yesterday's auction of $150 billion in loans. The results show that the bid/cover ratio was below 1.0 for the first time, at 0.92. Mind you, the amount of money taken, $138.09 billion, was the most ever, chiefly because the offering was the most ever (the previous largest offering was $75 billion), but what is new here is the idea that the Fed has finally arrived at a number by which we can judge just how much money banks need. This discovery process is something that has been ongoing for quite some time but will now speed up and be made clearer. (Crescenzi and Jim Bianco argue for the Fed to cut rates in the video)