Fed Boosts Emergency Lending to Banks, Seeking to Offset Liquidity Crisis

[Purveyor]

Source: Bloomberg News

March 7 (Bloomberg) -- The Federal Reserve plans to increase its loans to banks this month to offset a deepening credit crisis threatening to tip the U.S. economy into a recession.

The central bank increased to $50 billion each from $30 billion the amount intended for auctions of funds planned for March 10 and March 24. The Fed also said in a statement in Washington today that it will make $100 billion available through weekly 28-day repurchase agreements, where the central bank lends cash in return for assets such as Treasuries.

The decision is the central bank's latest attempt to reduce the threat to the economy from banks curtailing loans to companies and households. Banks and securities firms have posted losses exceeding $181 billion since the start of last year as the impact of surging defaults on subprime mortgages rippled through world financial markets.

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Traders increased bets that the Fed will lower its benchmark interest rate by at least three quarters of a point this month after a government report showed the biggest job loss in five years, adding to evidence the economy is contracting. Odds of a full percentage-point reduction, to 2 percent, jumped to 26 percent from zero yesterday, futures prices showed.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aasY8TBYT8MY&refer=home

[Magleetis]

1. Gotta keep

The rich folks flush with cash.

[pnwmom]

4. It's going to hurt a lot more than the "rich folks" if we go into

a severe recession.

[mainegreen]

2. You don't need the M3!

Everything is great!

[Javaman]

3. I see the feds new theme song is...

"kill, kill, kill the poor" by the dead kennedy's.

[Heywood J]

5. I think that's royally amusing -

People are betting on how far Helicopter Ben will drop the prime rate, and that it's even plausible he would drop prime to 2% or below. Helicopter is backing further and further into a corner. If prime does indeed become 2%, or even 2.25%, then Treasuries are paying less than even the official rate of inflation. No point at all in investing in them.

I wonder what that will do to the dollar, whether it will be more than a gradual loss this time.

[dreyer]

6. So I guess the Moron Asshole approach didn't work

So I guess the Moron Asshole approach didn't work (monkey in the white house). Go figure. The repukes next act is McCain (who was supposedly worse than the monkey when they picked there last winner).

[OKthatsIT]

7. oh please...this is just more giveaway money to the banks.

it won't help US. If they don't stop printing money, we'll lose the dollar and still owe our souls to corrupt bankers.

Wht the hell is everybody thinking?

[katty]

8. Fed's next decision brought to you by: Magic 8 Ball

[cliss]

9. Prediction:

(no crystal ball needed)

1. When the Fed lowers the interest rate next week, the price of oil will go up. By quite a bit.

2. When that happens, watch gas go through the roof. Watch food prices go up astronomically.

3. I've read that food prices are expected to quintuple. That means that if you spend $100 on groceries, you will soon be spending $500.