Banks may be using Fed borrowing facility to shift risky debt

Investment banks could be getting rid of unsaleable high-risk loans by using them as collateral to borrow funds from the Federal Reserve through the primary dealer credit facility.

The PDCF, launched on March 16, provides overnight funding to primary dealers in exchange for a specified range of collateral, including investment-grade corporate securities, municipal securities, mortgage-backed securities and asset-backed securities for which a price is available.

According to a Morgan Stanley report

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