Are the Bailouts of Wall Street Complements or Substitutes?

Abstract

The Term Securities Lending Facility (TSLF) lent $2.3 trillion worth of general collateral to eighteen investment houses in exchange for riskier securities. Treasury collateral was in high demand in 2008 and 2009 as repo markets shunned lower quality collateral. This paper finds a negative and significant relationship between participating in the TSLF and having funds from the Troubled Asset Relief Program (TARP) and other Federal Reserve lending programs. Thus, it appears that the TSLF was a substitute for other bailouts. In addition, dealers with higher paid CEOs were more likely to borrow in the next TSLF auction cycle.