Fed moves to protect financial system
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Mon, 17 Mar 2008 00:24:07 GMT |
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WASHINGTON (Reuters) - The U.S. Federal Reserve announced two emergency measures on Sunday to safeguard the financial system, lowering the discount rate it charges on direct loans to banks and announcing a new program to lend directly to other big financial firms.The central bank said in a surprise statement that it cut the discount rate to 3.25 percent from 3.5 percent, effective immediately, which puts that rate just a quarter point above the interbank overnight federal funds rate, the Fed's primary policy tool.It also said it was setting up a new lending program under which so-called primary dealers could borrow directly from the Fed at the discount rate."Liquid, well-functioning markets are essential for the promotion of economic growth," the Fed said.The central bank said the new lending facility for the primary dealers, big Wall Street firms with which it deals directly in financial markets, would be open for business on Monday and would be kept in place for at least six months.Both actions were approved unanimously by the Fed's Board of Governors.(Reporting by Mark Felsenthal, Editing by Toni Reinhold) (c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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