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NewsMine economy united-states 2008-jun-jul Viewing Item | Fed auctions 75b to ease credit stress { June 2008 } Original Source Link: (May no longer be active) http://biz.yahoo.com/ap/080701/fed_credit_crisis.html?.v=4http://biz.yahoo.com/ap/080701/fed_credit_crisis.html?.v=4
AP Fed auctions $75 billion to ease credit stresses Tuesday July 1, 10:02 am ET By Jeannine Aversa, AP Economics Writer Fed auctions another $75 billion to ease credit stresses, more loans on tap this month
WASHINGTON (AP) -- The Federal Reserve has auctioned another $75 billion in loans to squeezed banks to help them overcome credit problems and announced it will provide a fresh batch of the loans this month.
The central bank on Tuesday released the results of its most recent auction -- the 15th since the program began in December. It's part of an ongoing effort to ease financial turmoil and credit stresses.
In the latest auction, commercial banks paid an interest rate of 2.340 percent for the 28-day loans. There were 77 bidders. The Fed received bids for $90.88 billion worth of the loans. The auction was conducted on Monday with the results made public on Tuesday.
The Fed also said it will conduct two auctions in July. Banks will have an opportunity to bid on a slice of $75 billion in short-term loans in each auction.
In mid-December the Fed announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump. A global credit crunch has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.
The smooth flow of credit is the economy's lifeblood. It permits people to finance big-ticket purchases, such as homes and cars, and help businesses expand operations and hire workers.
Wanting to avert a broader panic that could endanger the entire U.S. financial system, the Fed has taken a number of extraordinary actions to provide relief. In its broadest extension of lending authority since the 1930s, the central bank agreed in March to temporarily let investment firms obtain emergency loans directly from the Fed, a privilege that only commercial banks had been granted.
The central bank is expected to focus more on these and other efforts to help banks and investment firms overcome any credit troubles now that it has ended its nearly yearlong series of interest rate cuts aimed at shoring up shaky economic growth.
Last week the Fed left its key rate alone at 2 percent as fears about inflation have mounted. The Fed is caught between two risky economic crosscurrents: plodding economic growth on the one hand and galloping energy and food prices that threaten to spread inflation on the other.
Lowering interest rates again would aggravate inflation. But boosting rates too soon to fend off inflation could deal a set back to fragile economic and financial conditions.
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