Fed to lend $20 billion to banks

[EV_Ares]

Central bank announces results of first of 4 special auctions it hopes will ease credit crunch resulting from the mortgage meltdown.

NEW YORK (CNNMoney.com) -- The Federal Reserve announced Wednesday that it was lending $20 billion to banks through the first of four special auctions designed to help alleviate the credit crunch on Wall Street.

The Fed announced the auction plan in conjunction with central banks in Canada and Europe last week. A senior official at the Fed said at the time that the central bank was hoping banks that needed funding would be less hesitant to ask for money through this anonymous auction process than they were to borrow directly from the Fed.

Many banks had been wary of borrowing money from the Fed through the so-called discount window because the Fed's discount rate of 4.75 percent is higher than the federal funds rate of 4.25 percent. The federal funds rate is what banks charge each other for overnight loans. The Fed lowered both rates last week by a quarter of a percentage point.

In addition, market observers feel that there is a stigma attached with borrowing at the discount rate because it may be a sign that banks are so desperate for short-term cash that they are willing to pay the higher interest rate for the funds.

To that end, the Fed said that the stop-out rate for the loans was 4.65 percent, a bit lower than the discount rate. The Fed said that it received submissions for $61.6 billion in loans from 93 bidders. The winning bidders will receive their loans on Thursday.

Link: http://money.cnn.com/2007/12/19/news/economy/fed_auctions/index.htm?postversion=2007121910

[no_hypocrisy]

1. To lend after it prints the extra $20 billion?

[glowing]

2. Can I place a bid.. with that kind of rate, I'd consolidate my other

debts and pay money back directly to the Feds..If then, I decide to bankrupt.. I bankrupt the FEDS direclyt ha,ha, ha. (in a very evil laugh).