Mortgage crisis, the Fed and central banks to provide liquidity

15 Dec

Posted by flicker as ECB , Fed , News

The Fed, in conjunction with other central banks, brings to the market cash to lighten the tension of the market on credit institutions as a result of the crisis of high-risk mortgages. The emergency intervention by the Fed decided to also involve the ECB, the Bank of England, Swiss National Bank and the Bank of International Cooperation Canada.La surprising maneuver is was decided after the decision of cutting a quarter point reference rates the cost of money taken by the FOMC, the operational arm of the Federal Reserve is the most important entry into the field resulting from the crisis resulting from the terrorist attacks of 11 September 2001 provides for the release of initial funding of $ 40 billion to be made available to banks also allow ¬ centar European Bank to finance $ 20 billion and the Swiss National Bank for $ 4 billion. The purpose of this maneuver is to fund the banks and long maturities more than to increase liquidity. Fred Goodwin, strategist at Lehman Brothers, commented: "The fact that action is coordinated means which there is unity of effort to declare war on the problem", while Ian Morris, an analyst at HSBC said that "There ' ¨ possibility that the action announced by the Fed, reinforced by the overall coordination, will contain the contagion and interbank rates soften on a global scale, not only in the USA. " In fact, the liquidity in the markets is not yet normalized, despite the rate cut reference made by most central banks around the world, except the ECB. As a result of market developments on this important point the Fed reserves the right to introduce additional funding initiatives.