Strong Interest in Fed's First $20B Loan Auction

The Federal Reserve on Wednesday awarded $20B in short-term loans at a rate of 4.65% in the first of four planned auctions, known as the Term Auction Facility or TAF, as part of a coordinated effort with other central banks to help ease the global credit crisis. Also on Wednesday, the European Central Bank auctioned $10B in dollar-denominated loans and the Swiss National Bank lent $4B. "It is not clear this facility is going to address the fundamental issues driving what is going on in interbank markets, which are the constraints on balance sheets and the need of some institutions to raise capital and more fundamentally concerns about counterparty credit risk," said Richmond Fed President Jeffrey Lacker. However, one analyst called the move a "hypodermic in the heart," saying it "gets us over year-end." The rate on the 28-day Fed loans is 0.1 percentage point below the usual 4.75% discount rate charged by the Fed, which received some $61.6B in bids from 93 banks in the auction. The winning bids and sizes of the awards weren't revealed. The Fed will offer 35-day loans in its second $20B auction today. Amounts to be sold in the next two Fed auctions, to be held January 14 and 28, haven't been disclosed.

Sources: Bloomberg, NY Times, Wall Street Journal

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Comments

[chinooking:]

the fed is who created this damn mess with their manipulation of the money supply,read the creature from jekyl island.bunch of damn socialists

2007 Dec 20 11:12 AM