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Central Banks Offer Extra Funds to Calm Money Markets

Posted By admin On September 18, 2008 @ 10:56 am In Featured Stories | Comments Disabled

John Fraher and Simon Kennedy
Bloomberg [1]
Thursday, Sept 18, 2008

The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion “to address the continued elevated pressures in U.S. dollar short-term funding markets.” The Bank of England, the Bank of Canada and the Swiss National Bank also participated.

Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.

(Article continues below)

“There’s a complete lack of faith in the markets,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “There’s a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.”

Markets welcomed the announcement, which was made in statements from each central bank at 9 a.m. Frankfurt time at the start of European trading. The cost of borrowing dollars overnight slid to 3.84 percent from 5.03 percent yesterday. It was 2.15 percent last week and reached the highest since 2001 on Sept. 15.

Full article here [1]


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URLs in this post:

[1] Bloomberg: http://www.bloomberg.com/apps/news?pid=20601068&sid=aW2z_iiBnF2E&refer=home

[2] Europe, UK central banks shore up markets reeling from Lehman Brothers’ crash: http://www.prisonplanet.com/europe-uk-central-banks-shore-up-markets-reeling-from-lehman-brothers%e2%80%99-crash.html

[3] Fed Says ECB, Others to Offer Unlimited Dollar Funds: http://www.prisonplanet.com/fed-says-ecb-others-to-offer-unlimited-dollar-funds.html

[4] Central Banks Net Buyers of Gold for 1st Time in 20 Years: http://www.prisonplanet.com/central-banks-net-buyers-of-gold-for-1st-time-in-20-years.html

[5] Banking crisis: Central banks pump billions in to ease the strain: http://www.prisonplanet.com/banking-crisis-central-banks-pump-billions-in-to-ease-the-strain.html

[6] European Central Bank Makes Massive Loans to 523 Banks: http://www.prisonplanet.com/european-central-bank-makes-massive-loans-to-523-banks.html

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