Is there no limit to the Fed’s bailouts of “fragile” Wall Street firms?
*Bloomberg, by Scott Lanman, July 30, 2008:
“The Federal Reserve extended its emergency lending programs to Wall
Street firms through January after policy makers judged that markets
are still ‘fragile.’
The Fed also plans to give securities dealers options for tapping one
of the loan programs to ensure financing through the ends of quarters,
when funding needs can jump. Commercial lenders will be able to borrow
from the central bank for a longer period, and the Fed boosted its swap
line with the European Central Bank.
Today's action reflects continued financial turmoil, with premiums
banks charge each other for three-month funds over the Fed's expected
benchmark rate little changed since May. It's the latest step in
officials' efforts to combat the yearlong credit crisis, after the
Fed's March rescue of Bear Stearns Cos. and the Treasury's backstop for
Fannie Mae and Freddie Mac this month.
‘The U.S. is pulling out all the stops here to make sure we don't have
a terrible downturn or a collapse in the financial system,’ said Allen
Sinai, chief global economist at Decision Economics in Boston. ‘There
isn't anything else the Federal Reserve can do but to keep pumping
liquidity into the system.’
The Primary Dealer Credit Facility for direct loans to securities firms
and the Term Securities Lending Facility for loans of Treasuries, both
begun in March, will now extend through Jan. 30. They would then be
canceled if the Fed judges that markets ‘are no longer unusual and
exigent,’ the Fed said in a statement today in Washington.”
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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