Fed injects $2B more into banking system

NEW YORK (CNNMoney.com) -- The Federal Reserve injected an additional $2 billion into the banking system Monday, marking the second time in as many sessions that the central bank has taken steps to help soothe jittery financial markets.

On Friday, the central bank injected $38 billion into the U.S. banking system in an effort to cool Wall Street fears about a credit crunch. The New York Fed said in a statement it was ready to conduct additional operations during the day as needed.

On Wall Street, stocks managed modest gains in midday trade.

Foreign banks have taken similar action, with the European Central Bank (ECB) adding another $65 billion into the European banking system Monday, the third session in a row. The Bank of Japan also added $5 billion, building on last Friday's addition of $8.5 billion.

Even though Friday's addition by the Fed marked its single biggest temporary addition since after the Sept. 11 attacks, the ECB has far outpaced the Fed, funneling $280 billion into European markets.

"My sense is that the European side is where this earthquake began - it's the epicenter," said Scott Anderson, senior economist at Wells Fargo & Co.

"Their exposure to mortgage-backed securities seems to be greater and the fear factor was greater."

BNP Paribas, France's biggest bank, reignited credit fears and helped send markets tumbling Thursday after it said it was halting withdrawals from three of its top funds, citing problems in the U.S. market for subprime mortgage loans made to borrowers with weak credit.

Worries about tighter credit conditions have roiled global stock markets over the past few months, with the Dow industrials posting some of its biggest losses of the year in recent weeks.

Wall Street has looked to the Fed to help soothe market jitters, hoping that the central bank may cut interest rates.

On Friday, speculation emerged that the central bank may implement an emergency rate cut before its next meeting.

But others believe the Fed will maintain its "wait-and-see" stance, given that policymakers stressed that inflation remains their primary concern at last week's policy meeting.