Loans -
US Federal Reserve releases more money to ailing banks - 31/03/2008
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The US Federal Reserve is to release another $100 billion (£50 billion) to major US banks in April in an effort to release some of the pressure the global credit crunch has put on the economy.
The Fed has offered short-term loans to banks through auctions every two weeks since December and it is thought the auctions will continue until this coming September. The amounts offered started at $20 billion, then rose to $30 billion before reaching the current peak of $50 billion in early March as the adverse effects of the credit crunch continued to cause concern.
The latest sum is to be offered in addition to the $260 billion short-term loans auctioned at the end of March. This move is accompanied by other unusual activity; the Fed is also allowing investment banks to borrow money from it directly, something that only commercial banks were allowed to do previously.
The aim of releasing the cash is to make banks less fearful about lending to each other, as their current unwillingness to do so has meant short term interest rates have rocketed.
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