Friday, March 7, 2008

Fed pumps in another $140bn

Fed Boosts Lending to Banks as Credit Rout Continues

The Federal Reserve plans to increase its loans to banks this month to offset a deepening credit crisis threatening to tip the U.S. economy into a recession. The central bank increased to $50 billion each from $30 billion the amount intended for auctions of funds planned for March 10 and March 24. The Fed also said in a statement in Washington today that it will make $100 billion available through weekly 28-day repurchase agreements, where the central bank lends cash in return for assets such as Treasuries.

Posted by 51ck-6-51x @ 03:28 PM (1403 views)
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14 thoughts on “Fed pumps in another $140bn

  • That isn’t going to save them! The trend is clearly heading towards recession.

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  • tyrellcorporation says:

    Just…one…more…fix…

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  • uncle chris says:

    If it was just a recession on the horizon, then I don’t think the FED would be that worried. I believe the desperate measures and utter panic being shown by them is down to the potential and looming collapse of the enitre US banking system – which quite obviously has loaned out far more money than it actually has in its vaults. As the slides continue, the more the deception being practised on the American people will become apparent.

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  • the problem with recessions is the way they decide when they are in one, often it is too late and has been in recession for a while…

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  • happyrenterz says:

    FT

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  • The worse the economy gets the more likely that Hillary Clinton will become the next President.

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  • Notaneconomicsguru says:

    Uncle Chris – I think that’s basically the reason for panic – the entire system itself is in mortal danger. I am worried that an escape is now no longer possible.

    However, isn’t it true that all banks lend more cash than they have on deposit? That’s the point of the fractional reserve system – at least as I have understood it. The point is that in that system loans to customers are treated as assets against which even more loans can be made. This is OK just so long as the ‘loanees’ can all keep up with their repayments. Then the bank has a healthy turnover to fund its liabilities (operating costs, cash withdrawals, interest on deposit etc). The problem I think is that they have been a) too eager to lend to too many now defaulting customers and b) too eager to invest in derivatives which have proven to be far riskier than they believed. The defaulted loans no longer provide turnover and worse can no longer be regarded as an asset against which to make further (less risky loans) and also have to be taken off the balance sheet as a loss. In addition the value of the derivatives they hold have fallen because their desirability has diminished.

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  • “The worse the economy gets the more likely that Hillary Clinton will become the next President.”

    Which will, of course, just exacerbate the problem.

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  • Anyone else now think USA PLC is technically bankrupt?

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  • Printing money remorselessly is a sure sign of desperation and could result in the opposite required effect. This would add another blow to the descending Dollar and looking at the Stock Market reaction, they don’t seem too impressed. The chasm looks to be getting deeper and deeper. This looks to be developing into an almighty problem.

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  • Yes – and the worry is that UK PLC is shortly to follow into the bankruptcy court.

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  • Monetary policy in the U.S. is dead. Temporarily. It may resurrect after today’s central bankers have left.

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  • it_is_going_with_a_bang says:

    They won’t need banks soon. Everyone will just have a FED account where you don’t pay money in it just puts money in your account every month for you to spend.

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  • Boynamedsue says:

    I don’t think they have a clue what they are doing. They are creating inflation by printing all this money and passing it on to the banks, of course this money can’t be lent out because no one is credit worthy now.

    So what’s it for? To keep the banks stumbling on for another month?

    I don’t understand what they are attempting to achieve, this isn’t pump-priming, because the banks refuse to lend.

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