FED WILL PROVIDE AS MUCH AS $900 BILLION IN LOANS TO BANKS

October 6th, 2008

Via: AP:

The Federal Reserve will provide as much as $900 billion in cash loans to squeezed banks in an urgent effort Monday to break through a dangerous credit clog that threatens the economy and has unhinged financial markets around the globe.

The Fed’s action is aimed at spurring spooked financial institutions, which are hoarding cash, to lend not only to each other but also to individuals and businesses.

Even as the Fed pledged to take “additional measures as necessary” to battle the worst credit crisis in decades, Wall Street was in a nosedive. The Dow Jones industrials plunged more than 500 points in morning trading. Fears spread around the globe about the ability of policymakers in the United States and abroad to turn around the situation.

The lending lockup is a key reason why the U.S. economy is faltering. Unable to borrow money freely or forced to pay a high cost to borrow, employers are cutting jobs and reducing capital investments. Consumers have retrenched.

To better open the lending spigots, the Fed said 28-day and 84-day cash loans being made available to banks will be boosted to $150 billion a piece, effective Monday. Those increases will eventually bring the amounts outstanding under the program to $600 billion.

Loans that will be made available in November to banks also will be increased to $150 billion each. That makes a total of $900 billion in credit potentially outstanding over year end, the Fed said.

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One Response to “FED WILL PROVIDE AS MUCH AS $900 BILLION IN LOANS TO BANKS”

  1. pdugan says:

    It’s almost like the games kids play where they try to top each other’s sums. Pretty soon the Fed will provide a credit like for “double-plus infinity”, with the ECB following up with “triple infinity plus one”. I wonder who will win?

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