Fed Dishes Out Even More Liquidity: Too Much Apparently Not Enough

From BLOOMBERG: The Federal Reserve expanded its cash- loan auctions for banks by 50 per cent to $75 billion each after higher borrowing costs blunted the impact of the four-month-old program.

The Fed also increased its currency-swap arrangement with the European Central Bank by two-thirds to $50 billion and doubled the amount with the Swiss National Bank to $12 billion, extending their terms through January. In a third move, the Fed will accept other AAA rated asset-backed securities as collateral for Treasury loans through another program.

Fed Chairman Ben S. Bernanke created the Term Auction Facility and two other programs to reverse a decline in liquidity that began last year with the collapse in the market for subprime mortgages. Today’s move may reduce loan payments for some companies and homeowners with variable-rate mortgages.

The actions were taken “in view of the persistent liquidity pressures in some term funding markets,” the Fed said in a statement.

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