Credit crisis to be eased by bigger auctions to banks March 7, 2008
By Jeannine Aversa
Washington - The Federal Reserve said Friday it is taking bigger steps to ease the nation's credit crisis, including increasing the amount of money it will auction to banks this month to $100 billion (€65.28 billion).
The Federal Reserve said it will raise its planned March 10 and March 24 auctions to $50 billion (€32.64 billion) each, up from the $30 billion (€19.58 billion) limits it had previously announced. The auctions serve as short-term loans to get banks the cash they need to keep lending.
Fed officials said in a statement they would move to even larger amounts at future auctions if necessary.
The Fed also announced another effort to combat the credit shortage - a series of repurchase transactions expected to reach $100 billion (€65.28 billion).
The Fed has been working to pump billions of dollars into the nation's banking system to aid an economy rocked by the subprime mortgage crisis and the severe tightening of credit. The central bank started its new type of auctions in December to provide short-term loans to cash-strapped banks.
The Fed hopes that increasing their resources will keep banks lending and prevent the credit squeeze from aggravating the current economic slowdown. Economists say the nation is teetering on the edge of a recession, if one has not already begun. - Sapa-AP
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