Top central banks extend U.S. dollar-lending program

Treasury Secretary Timothy Geithner's signature appears on a freshly printed $20 bill. / Mark Wilson/Getty Images

FRANKFURT, Germany Major central banks acted Thursday to try to shore up confidence in the global financial system by extending a program that makes it easier for banks to borrow U.S. dollars.

Thursday's move renews for a year a program that was expanded in November 2011 in response to Europe's debt crisis. It had been set to expire in February.

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The program lets central banks swap their currencies at the U.S. Federal Reserve in exchange for dollars. Commercial banks can then borrow dollars, the dominant currency of trade, at low rates. Central banks pay the Fed interest on the dollars they lend to commercial banks.

The move is intended to help stabilize a global financial system straining from Europe's financial crisis and slowing growth worldwide. The alliance of 17 European countries that use the euro is in recession, with unemployment at a record high 11.7 percent.

The central banks issued news releases simultaneously Thursday in a coordinated signal to investors and lenders that they will continue to try to ease global financial strains.

Still, economists noted that the dollar swaps aren't being heavily used, a sign that most banks have enough dollars to make dollar-denominated loans. As of last week, the Fed has about $12.2 billion in dollar swaps outstanding, down from $109 billion in February. The record high of $583.1 billion was set in December 2008, at the height of the financial crisis.

"This announcement is largely symbolic," said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University. "The Fed and the other central banks are telling the markets that they are still around and willing to help out if they are needed."

Taking part in Thursday's announcement, besides the Federal Reserve, were the European Central Bank, the Bank of England, the Swiss National Bank and the Bank of Canada. The Bank of Japan is to consider the measure at its next meeting. The ECB also said it would continue its operations to lend dollars to banks for one week and three months.

The ECB has said it could buy bonds issued by heavily indebted countries. That step could drive down borrowing costs for financially troubled governments and indirectly for companies.

The coordinated action follows other recent efforts by the ECB, Fed and Bank of England to strengthen their financial systems and economies.

On Thursday, European Union nations agreed on the foundation of a fully fledged banking union. And Greece's euro partners approved billions in bailout loans that will prevent the nation from going bankrupt.

On Wednesday, the Fed said it planned to keep U.S. interest rates ultra-low even after unemployment falls close to a normal level, which it thinks could take three more years. And it said it will keep spending $85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth.

[joesapper]

A sum of an extra $85, Billion a month is being printed now , since September an extra $40, Billion was being printed , and now with an extra $45, Billion takes it over the top of utter failure . No Congress involved as it is the Fed game of no approval required .

So the .46 cents of every dollar is on the credit card of China , so if the USA credit rating is down graded again and China raises the interest rates , how much will that .46 cents turn into over night ?

Just a .5 cent hike folks is worth hundreds of Billions over the term . The EU printing failure is well recorded and yet the socialist continue the same failed results . Pres Obama said Bush Jr was unpatriotic in the debt owed to China , well I am no Bush Cheney guy , but Pres Obama is crushing the credit card with China under the weight of debt on our grand children , which will burdened them for a life time . Cut spending , or China will pull the strings of the USA economy for decades to come if we make it that far .

Do you know that the EU is going to a one banking authority , guess who is the big investor with a big say ? And no it is not the USA .

This of course is just my view , just one of millions of others.