- The Washington Times - Saturday, February 2, 2008


The Federal Reserve said yesterday it would provide $60 billion in fresh cash to commercial banks in two auctions in February and will keep holding auctions every other week for as long as needed to ease the credit crisis.

The Feb. 11 and Feb. 25 auctions will mark the fifth and sixth time the Fed has used a new-auction process announced in December to provide cash-strapped banks with extra reserves.

In a brief statement, the Fed said it intended to keep holding the auctions every other week “for as long as necessary to address elevated pressures in short-term funding markets.”

The Fed said the minimum bid in the February auctions would be reduced to $5 million, down from $10 million in the previous auctions, to “facilitate participation by smaller institutions.”

The Fed’s hope is that the increased resources provided to the banking system will keep banks lending and prevent a severe credit squeeze from pushing the country into a recession.

On Wednesday, the Fed announced it was cutting its federal funds rate, the interest that banks charge each other for overnight loans, by a half-point to 3 percent, marking the second big rate cut in just over a week.

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