Reply #36: Fed taking action to counter cash crunch

[AnneD]

WASHINGTON — To help alleviate any end of year cash crunch, the Federal Reserve announced Monday that it will conduct a series of special operations starting this week.

The Federal Reserve Bank of New York, in a brief statement, said it will make the first such operation on Wednesday, for about $8 billion. The operation, essentially makes available short-term, six-week loans, maturing on Jan. 10, to financial institutions, and thus boosts cash available to them.

The Fed didn't say when its next operation would be conducted. "The timing and amounts of subsequent term operations spanning the year-end will be influenced by market and reserve developments," the Fed said in its statement.

The Fed has engaged in such special operations in previous years, most recently in 2005.

By making sure there is ample cash, or liquidity, in the U.S. financial system, the Fed hopes to remove any upward pressure on its key short-term interest rate called the federal funds rate. The current target for the funds rate, the interest banks charge each other on overnight loans, is 4.50 percent. It is the Fed's main tool for influencing overall economic activity because the funds rate affects many other interest rates charged to people and businesses.

The end of year typically can be a time when financial institutions scramble for cash and the recent credit crisis has heightened concern.

http://www.chron.com/disp/story.mpl/ap/business/5329155.html

Where to file this jem... Don't piss on my leg and tell me it's raining file :think: or I can't believe they think I'm THAT stupid file.