Since the credit crunch, central banks have been injecting massive amounts of money into the banking system in an effort to keep credit flowing. These measures have only been partly successful. In December, central banks in Europe and the US took the step of introducing term auction facilities (TAFs) as a further measure against the turmoil. A total of $65 billion was provided by the Federal Reserve, the European Central Bank and the Swiss National Bank, and the Bank of England added a further £8.5 billion.
At the time, the TAFs were given a mixed reception, with many investors hoping for “a bolder response to the growing housing and mortgage crisis”. Bankers too were unconvinced, saying that the cash injections would not be sufficient and...
