The Fed Tries New Tricks

You really have to give Federal Reserve Chairman Ben Bernanke an A+ for effort.  As the financial markets continue to struggle, the Federal Reserve is inventing new tools to inject liquidity into the market and calm investor fears. 

Today, the Fed announced a new Term Securities Lending Facility (TSLF), pursuant to which the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program).  The Fed is working to design an auction process for making these securities available.  Auctions will be held on a weekly basis, beginning on March 27, 2008.

The Federal Reserve is working very cooperatively with central banks in the other G-10 countries to head off more serious global economic problems.

Link to FRB Press Release:  http://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm

And how are these measures being received?  Very favorably!  The Dow Jones Industrials posted their largest one day gain in five years.

Link to news story:  http://biz.yahoo.com/ap/080311/wall_street.html

The only problem is:  Banks are still not lending.  (Hey, once burned twice shy!)

Link to news story:  http://finance.yahoo.com/banking-budgeting/article/104605/Fed-Pumps-More-Money-Into-Financial-Markets

(ag) Tues., Mar. 11, 2008, in Economy