Anyhow I digress - on to the next step of the emergency we face. Federal Reserve is making loans direct to banks much earlier in the year and for longer duration: 43 days. Not that it's a crisis or anything...
- Seeking to reassure banks amid the continuing credit crisis, the U.S. Federal Reserve will provide $8 billion to ease concerns about lending during the holiday season. The $8 billion - essentially a low-interest loan to U.S. banks - will be issued Wednesday and repaid Jan. 10, the Fed said Monday. The 43-day loan period is the longest in three years for this type of year-end injection.
- While it is not an unusual step for the Fed, the injection usually takes place later in the fourth quarter and involves a smaller amount. In 2005, the last time the Fed issued year-end funds, it issued 28-day repurchase agreements for $5 billion, starting Dec. 8.
- Wall Street's reluctance to lend can be intensified during the holiday season, as consumers demand more money for spending and banks look to close out their yearly balance sheets with a generous amount of capital and investments in safe securities like U.S. Treasury notes.
- "Many large institutions are reluctant to let money go, even for overnight lending purposes," said Bernard Baumohl, managing director at the Economic Outlook Group. "They prefer to hold onto the cash."
