Fed Mulls More Moves to Ease Liquidity

The Federal Reserve, aware that Tuesday's quarter-point rate cut did not satisfy investors as a sufficient effort to aid locked-up credit markets (full story), is considering all means of easing liquidity, sources said Tuesday. The DJIA fell 2.1% following the announcement of the rate cut, erasing a third of its gains since late November (full story). "From talking to clients and traders, there is in their view no question the Fed has fallen way behind the curve," said Morgan Stanley economist David Greenlaw. "There's a growing sense the Fed doesn't get it." The Financial Times said the Fed is likely to propose a new liquidity facility that would auction loans to banks. This facility would give banks access to funds without the stigma associated with the discount window. The WSJ said the Fed is also considering cutting the discount rate again, making longer-term loans available to money-market dealers, and providing easier collateralized loans. New action could be taken as early as Wednesday, sources say.

Sources: Reuters, Wall Street Journal
Additional Reading: The Fed 's Rate Cut Fails to Change Reality

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.