Fed Loans Another $75 Billion To Struggling Banks

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Source: Associated Press

WASHINGTON—Working to relieve stressed credit markets, the Federal Reserve has auctioned another $75 billion in loans to squeezed banks, bringing the total to $510 billion since December.
The central bank on Tuesday announced the results of its most recent auction—the 12th—since the program to help banks overcome credit problems started in December.

It's part of an ongoing effort by the Fed to help ease the credit crunch, which erupted last August and hit a crisis point in March with the near collapse and forced sale of Bear Stearns, the nation's fifth-largest investment house, to JP Morgan Chase & Co.

Housing, credit and financial problems have weighed heavily on the economy, sharply slowing its growth.

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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 life blood. 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 action to provide relief.

In its broadest extension of lending authority since the 1930s, the central bank agreed to temporarily let investment firms obtain emergency loans directly from the Fed, a privilege that only commercial banks had been granted.


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