Fed Ends Exemption Aimed at Adding Mortgage Liquidity

"The Federal Reserve Board today removed an exemption it had given to six banks at the start of the financial crisis in 2007 aimed at boosting liquidity in financing markets for mortgage- and asset-backed securities.

The so-called 23-A exemptions, named after a section of the Federal Reserve Act that limits such trades to protect bank depositors, were granted days after the Fed cut the discount rate by half a percentage point on Aug. 17, 2007. Their removal is part of a broad wind-down of emergency liquidity backstops by the Fed as markets normalize.