WASHINGTON, March 16, 2008
Fed Takes New Steps To Ease Credit Crisis
Lending Rate Cut By A Quarter Point And New Loan Facility Created For Big Investment Banks
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Federal Reserve Chairman Ben Bernanke said new steps announced by the central bank, March 16, 2008 should help squeezed financial institutions get cash infusions. (AP / file)
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Play CBS Video Video Fed Aids Troubled Bank The Federal Reserve has provided an unprecedented short-term loan to the struggling investment bank Bear Stearns. Randall Pinkston reports.
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Video Fed Loans Banks Billions In an unprecedented move, the Federal Reserve lent banks billions of dollars to kick-start the credit market. In response, the Dow posted its biggest gain in five years. Deirdre Bolton reports.
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Video MoneyWatch Fed chief Ben Bernanke advises lenders to help troubled homeowners by lowering their rates. And a bankrupt retailer won't accept their own gift cards. Alexis Christoforous reports.
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
The central bank approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created a lending facility for big investment banks to secure short-term loans. The new lending facility will be available to Wall Street firms on Monday.
"These steps will provide financial institutions with greater assurance of access to funds," Federal Reserve Chairman Ben Bernanke told reporters in a brief conference call Sunday evening.
The Fed acted just after JPMorgan Chase & Co. agreed to buy rival Bear Stearns Cos. for $236.2 million in a deal that represents a stunning collapse for one of the world's largest and most venerable investment banks. Just on Friday the Fed had raced to provide emergency financing to cash-strapped Bear Stearns through JPMorgan. Days earlier the Fed announced a set of other unconventional steps to thaw out a credit market in danger of freezing shut.
"It seems as if Bernanke & Co. are pulling out all the stops to avoid a serious financial market meltdown," Richard Yamarone, an economist at Argus Research, said Sunday evening.
However on world financial markets, Asian stocks plunged early Monday after the JPMorgan and Fed announcements. Markets in Australia and New Zealand were also off.
Oil prices hit a record in Asian trading as the value of the dollar continued its free fall and U.S. stock index futures were down sharply, suggesting Wall Street would open lower after sinking Friday.
"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.
President Bush has scheduled a White House meeting Monday afternoon with his Working Group on Financial Markets, which includes Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox.
Paulson said Sunday, "I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets."
The new lending facility - described as a cousin to the Fed's emergency lending "discount window" for banks - is geared to give major investment houses a source of short-term cash on a regular basis - if they need it.
It will be in place for at least six months and "may be extended as conditions warrant," the Fed said. The interest rate will be 3.25 percent and a range of collateral - including investment-grade mortgage backed securities - will be accepted to back the overnight loans.
The "discount" rate cut announced Sunday applies only to the short-term loans that financial institutions get directly from the Federal Reserve. It doesn't apply to individual borrowers.
The Fed's actions are the latest in a recent string of innovative steps to deal with a worsening credit crisis that has unhinged Wall Street. The action comes just two days before the central bank's scheduled meeting on Tuesday, where another big cut to a key interest rate that affects millions of people and businesses is expected to be ordered. That key rate is now at 3 percent and is expected to be cut by at least one-half percentage point on Tuesday. Analysts said the Fed's new steps may lessen pressure for a super-sized cut to that rate.
The Fed said in a statement that the steps are "designed to bolster market liquidity and promote orderly market functioning ... essential for the promotion of economic growth."
Even with the Fed's aggressive moves, economic and financial conditions keep deteriorating. An increasing number of economists believe the country already has slipped into its first recession since 2001. Many economists think that the economy is shrinking now in the January-to-March quarter. The first government figures on first-quarter economic activity will be released in late April.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
Let the losers lie in their own $hit! Don''t use a penny of my money to bail the c*cksuckers out.
But the Repugniscum way is welfare for rich corporate hos.
http://www.federalreserve.gov/
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Im concerned that Big business gets away with anything they want while setting up an economic framework to help consumers fail.
Posted by ov442 at 02:27 PM : Mar 17, 2008
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Sounds like you are interested in how the banking system works.
hereya go:
http://www.federalreserve.gov/
Of course they are. They want to inflate away all of the bank losses. Of course, inflation is bad for the country as a whole, but the country as a whole doesn''t matter- only those who work on Wall Street.
SO GO AHEAD AMERICA BUY INTO ALL THIS BULL S/H/I/T/ AMERICA IS GOING DOWN
We either bite it now or we bite it harder later.
only then will the goverment see that we the people can and will do something to get our country back.
with no tax money comming in they will have to do something fast... this is our country and its time we the people take it back. this way we are not killing anyone, we take it over the smart way, their way the only way that would hurt them..the great old dollar.........
so its not at all the responablity of the homeower to get it appraised was it...now these investment banks were selling all these infated homes to other invester saying we have 50 billion worth of homes for sale, would be worth in 5 years 75 billion so who wants to buy it at 60 billion, all hands went up. now they are finding out that the 50 billion was only worth 25 billion maybe, and the 60 billion they payed for it is now really worth 20 billion maybe...
the feds should of just payed off all the morgages with the 1 trillion dollars that they just flust down the toilet...the market woulded be in the mess.
if you are smart everyone should be takeing all they money out of markets and banks and put it under the bed...that would put a end to this mess.
Im concerned that Big business gets away with anything they want while setting up an economic framework to help consumers fail.
....White House press secretary Dana Perino said Bush had been kept informed of the Fed%u2019s intended actions through a variety of people, but that he was not personally involved in making or approving the decisions.]
The only thing that guy is on top of is a pile of money for himself and his cronies, and a bunch of liars in his administration.
Posted by Terrapin78 at 10:15 AM : Mar 17, 2008
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I love that! Excellent line!
We''''ll have to begin using that against the Bushbots on this board. We''''ll need to repeat it like a chorus line!
Posted by USAyesterday at 11:25 AM : Mar 17, 2008
would just make you look more immature than you already are
Posted by Oscarez at 09:53 AM : Mar 17, 2008
yea thats it...what a moronic post
Instead, the government has to protect their buddies in the banking industry and sure up both the multi-million dollar bonuses of banking CEOs who made bad decisions as well as the profits of their Saudi friends who own Citibank.
This isn''t free market capitalism. It is a corrupt oligarchy of corporations, where the government takes the bill for all risks, but the corporations get the rewards.
"One thing is for certain, we''re in challenging times," the president said after meeting with Treasury Secretary Henry Paulson and other senior economic advisers. "But another thing is for certain: We''ve taken strong, decisive action."
The president commended the Fed for its urgent actions over the weekend. "We''ve shown the country and the world that the United States is on top of the situation," he said.
9 million dollars in cash disappears in Iraq, 17 million dollars unaccounted for in Pakistan.
Is this a great country or what? In the United States, even a true MORON can be President.