Bankruptcy

Fed Opens Window Wider

By J. Michael McBride

The Federal reserve has made it even easier for banks to borrow money from the Fed. Specifically, the previous loans had to be paid back in 28 days and now that is being extended to 84 days under the current auction. There have been so many opportunities to say these words that we need not say them again, but … “never since the Great Depression” have we seen this type of intervention by the federal government.

Quote:

“The first 84-day auction will take place on Aug. 11. The two central banks will conduct the auctions on a biweekly basis.

The Fed will alternate between auctions of $75 billion of 28-day credit and auctions of $25 billion of 84-day credit. The ECB will conduct $20 billion of 28-day maturities and $10 billion of 84-day maturity. The Swiss National Bank will also offer 84-day loans.

Experts said the move reinforced the sense that central banks remain quite concerned about the fragility of financial markets.

One analyst said the 84-day maturity is targeted at bringing the three-month LIBOR inter-bank lending rate down.

Banks have been reluctant to lend to each other and also have less cash on hand to lend.”

Here is an article on the Fed’s latest actions:
http://www.marketwatch.com/news/story/fed-tweaks-emergency-lending-operations/story.aspx?guid=%7B71C2F44A%2D23EF%2D49AF%2D8D7E%2D26DF366B51F7%7D

Michael

Full post as published by Texas Lawyer Blog on August 06, 2008 (boomark / email).