Fed pumps out more dollars

Fed increases deals with ECB, Swiss National bank to provide $13B to banks in Europe; U.S. banks, Wall Street firms also increase their borrowing from Fed.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- The Federal Reserve expanded deals early Friday morning with two of its counterparts in Europe in order to make an extra $13 billion available to banks there, after reporting increased lending to U.S. banks and Wall Street firms.

The deal will have the Fed provide $10 billion to the European Central Bank and $3 billion to the Swiss National Bank. In return, it will receive a reciprocal amount of foreign currency from each country.

The $13 billion comes on top of the $277 billion in such swap deals that had previously been announced, including $110 billion with the ECB and $27 billion with the Swiss National Bank.

Friday's action helps provide dollars to foreign banks that needed the U.S. currency to transact business but had been unable to access the Fed directly the way U.S. banks can.

The three central banks said the latest action is designed to help banks that needed access to the cash to close transactions at the end of the third quarter, which concludes on Tuesday.

The Fed has been taking steps to pump dollars into the U.S. financial system as well, lending out more than $140 billion over the course of the last week.

Figures released Thursday showed that borrowing by Wall Street securities firms totaled $105.7 billion as of Wednesday, up from $59.8 billion a week earlier.

In addition, under an emergency program unveiled by the banks last week, commercial banks borrowed $72.7 billion through Wednesday in order to buy commercial paper from money-market mutual funds.

And loans through the traditional discount window rose to $39.3 billion, up $5.9 billion from a week earlier. Other credit extensions jumped by $16 billion to $44 billion.

The moves come as banks and Wall Street firms have become reluctant to lend money to each other, or to customers. There are reports of banks hoarding cash out of concerns about their own future as well as uncertainty about the financial condition of other institutions.

That resulting freezing of credit and financial markets has prompted the Treasury Department and Fed to push for a $700 billion bailout package that would have the government buy mortgage-backed securities whose value has plunged in the face of sliding home prices and climbing foreclosures.

Congressional negotiators were reportedly close to a deal Thursday to win bipartisan approval of the bailout package but objections from House Republicans have thrown the status of those talks into doubt.

The announcement also came the day after Washington Mutual was taken over by the Federal Deposit Insurance Corp., making it the largest bank failure in U.S. history. The nation's largest thrift was then sold to JPMorgan Chase (JPM, Fortune 500). To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More
15 execs who make more than their CEOs Sure, corporate chiefs' pay often is eye-poppingly high. But at some companies, executives lower down the ladder quietly out-earned their CEO bosses. More
Novelty gifts for people with money to burn For those who've got the cash, these holiday gifts can really make a statement. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.