View Full Version : Fed Pumps Two Billion Dollars Into U.S. Financial System

08-14-2007, 06:50 AM
Fed pumps two billion dollars into US financial system


Published: Monday August 13, 2007

The Federal Reserve on Monday pumped two billion dollars into the jittery US financial system just after the stock market opened, the Federal Reserve Bank of New York said.

The Fed injected tranches totaling 62 billion dollars Thursday and Friday into the financial markets to ease tightening credit linked to the crisis in the US subprime mortgage sector.

In a statement Monday before the financial markets opened, the New York Fed said that it "stands ready to conduct additional operations later in the day as needed."

The latest injection is much smaller than the central bank's massive 38 billion dollars pumped into the banking system Friday, its biggest operation since the week of the September 11, 2001, terror attacks.

On Thursday the central bank pumped 24 billion dollars into the market, amid sharp falls on global stock markets which were triggered by fears over the multitrillion-dollar US mortgage market and a related credit crunch.

It said it would also "provide reserves as necessary through open market operations" to keep its short-term federal funds interest rate close to its 5.25 percent target and to boost liquidity.

The credit squeeze has occurred as banks revaluate their exposure to the housing sector amid surging home foreclosures.

The Fed moved amid fears on Wall Street that the widening credit crunch could stoke interest rates on bank and commercial loans and slow US economic growth.

The central bank's actions appeared Monday to assuage some Wall Street concerns, with the Dow Jones Industrial Average up 0.67 percent at 13,327.90 in morning trade.

The European Central Bank also acted Monday, injecting 47.66 billion euros (65.06 billion dollars) into the money market to address liquidity shortages amid growing fears about the US home loan sector. On Thursday and Friday it had added a combined 155.85 billion euros (212.98 billion dollars) to eurozone markets.