Fed auctions $50 Bn to cash-strapped banks

Fed auctions $50 Bn to cash-strapped banks

Tuesday, 25 March 2008, 07:00 Hrs
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Washington: The U.S. Federal Reserve Tuesday said it auctioned $50 billion in short-term loans to cash-strapped banks to combat a persistent credit crunch.

This was the central bank's eighth auction aimed at injecting more money into the banking system since mid-December 2007, when the Fed established its Term Auction Facility to deliver short-term funds to banks in need of liquidity.

The series of auctions so far have pumped $260 billion into the banking system.

The latest auction produced an interest rate of 2.62 percent, lower than the 2.8 percent generated in the previous one, which was held March 11 and also provided $50 billion to banks.

There were 88 bidders for a slice of the latest $50 billion in 28-day loans. Demand was high, with the Fed receiving bids for $88.9 billion worth of loans.

Although the Fed had taken steps such as rate cuts to add liquidity to the banking system, commercial banks had avoided borrowing money from the central bank through its discount window out of concern that investors would see the move as an indication of the banks' underlying financial problems.
Source: IANS
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