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Fed Announces New Initiatives
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by polishd | March 16, 2008 at 03:28 pm
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The Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning. Liquid, well-functioning markets are essential for the promotion of economic growth.
First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.
Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. This step lowers the spread of the primary credit rate over the Federal Open Market Committee’s target federal funds rate to 1/4 percentage point. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days.
The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc.
Lets hope this one will work.
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Most RecentMost Recommended Comments (5)
at 16:59 on March 16th, 2008
Analysts are calling these and other moves, mere band-aid solutions. What do you think? Do you think the feds should engage in more heavy-handed regulatory solutions?
at 18:54 on March 16th, 2008
Who knows ? I thought it was good news until I saw Bear Stearns sells for 2$.
at 20:05 on March 16th, 2008
Asian stocks are falling on the news. Also Fed action is unlikely to be successful if what we have is a solvency issue and not a credit crunch.
at 21:16 on March 16th, 2008
All we can do is pray.
at 22:45 on March 16th, 2008
This is going to do little to help right the market. The problem right now is not liquidity it is confidence. Unfortunately, the Federal Reserve can do nothing about that.
What this economy needs now are some fiscal changes. Slashing the corporate tax rate to bring it in line with the rest of the world (10%+ of a cut) would be a good start. The government should also allow companies to speed up depreciation schedules in order to spur capital investments.
On a personal note I have always marveled at the notion that we can "manage" our economy by changing a couple of interest rates. If you take a step back you will realize how absurd this notion is. No one thing decides the fate of such an amazing machine as the American economy.