By STEVEN R. WEISMAN
WASHINGTON — The Federal Reserve announced new steps on Friday to help ease tight global credit markets by increasing the size of its cash auctions to banks and allowing financial institutions to put up credit card debt, student loans and car loans as collateral for Fed loans.
The Fed also acted in coordination with central banks in Europe to make it easier for European banks to obtain dollars in currency swaps.
In a terse statement Friday morning, announced just before the government reported that 20,000 jobs were lost in April, the Fed said that it was acting to counter “persistent liquidity pressures” in credit markets in Europe and the United States.The Fed’s action came as some analysts are saying that a measure of stability has returned to American financial markets after months of turbulence. Nevertheless, the Fed has made clear that it remains concerned about the risk from credit markets seizing up because of losses from bad loans, particularly in the housing sector.
Two days ago, the Fed signaled its continuing concern about the economy, lowering short-term interest rates by a quarter of a percentage point, to 2 percent, from 2.25 percent, while signaling that it would not be lowering rates again for a while.
The actions Friday involved two lending facilities set up recently by the Fed to meet the needs of banks, investment banks and other financial institutions hit by the credit crisis after a series of disclosures about the shakiness of their packages of subprime mortgages.
One of these new entities, the Term Securities Lending Facility, can lend up to $200 billion to 20 different banks and investment banks known as primary dealers. Until now, the primary dealers could put up mortgage-backed securities as collateral for these Fed loans.
The Fed’s action allows them to expand the type of collateral that can be pledged to include student loans, car loans, home equity loans and credit card debt, as long as it is highly rated.
Source:
http://www.nytimes.com |
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