How does the Fed determine how much to lend against the securities and loans it accepts as collateral?
A table of recommended margins for various types of collateral is posted on the Feds website. The Fed lends only a percentage of the market value of the collateral, with the haircut ranging from 2 per cent on short-term, top-quality Treasuries (in other words, the lendable value of a two-year Treasury note is 98 per cent) to 40 per cent for certain types of consumer loans.
