Fed Grants $30 Billion Emergency Credit Line to Barclays, RBS - Telegraph

The U.S. Federal Reserve has granted requests from Barclays Bank and the Royal Bank of Scotland and provided them with a total of up to $30 billion (£15 billion) in emergency funds to assist American clients caught in the credit crunch, the Telegraph reported over the weekend. The Fed said it will grant the funds for clients "in need of short-term liquidity," particularly those holding mortgage-backed securities. Barclays will be able to borrow up to $20 billion and RBS up to $10 billion, for which they would put up collateral. "This secures another potential source of funding should our U.S. clients seek it," said a spokesman for Barclays Capital. Both Barclays and RBS have been outspoken about the Bank of England's reluctance to provide emergency funding during the credit crisis. Bob Diamond, CEO of Barclays Capital, said in an interview last month that it is "down to central banks" to provide liquidity. Shortly thereafter, the Bank of England intervened to keep Northern Rock afloat. Across the Atlantic, the U.S. Treasury prodded a trio of Wall Street banks to set up a $75 billion superfund -- MLEC -- intended to bail out structured investment vehicles [SIVs] (full story). Its object is to prevent SIVs, which are struggling to refinance short-term commercial paper loans, from being forced to liquidate quality assets -- a scenario that could result in what the Telegraph calls a "fresh bout of contagion in global markets."

Sources: The Telegraph, , Reuters
Commentary: The Northern Rock Bailout: Sign of a Much Bigger Problem? • Global Rescue Fund Seeks Participants - WSJ • The Superfund's Merits: Sorry Hank, I'm Just Not Buying It
Stocks to watch: BCS, RBSPY. ETFs: PID

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