Wednesday, March 26, 2008

U.S. Fed auctions another $50 bln to banks

WASHINGTON, March 25 (Xinhua) -- The U.S. Federal Reserve said Tuesday it auctioned 50 billion U.S. dollars in short-term loans to cash-strapped banks on Monday to combat a persistent credit crunch.

This was the central bank's eighth auction aimed at injecting more money into the U.S. banking system since mid-December 2007, when the Fed established its Term Auction Facility to deliver short-term funds to banks in need of liquidity.

The series of auctions so far have pumped 260 billion U.S. dollars into the banking system.

The latest auction produced an interest rate of 2.615 percent, lower than the 2.80 percent generated in the previous one, which was held on March 11 and also provided 50 billion U.S. dollars to banks.

There were 88 bidders for a slice of the latest 50 billion U.S. dollars in 28-day loans. Demand was high, with the Fed receiving bids for 88.9 billion U.S. dollars worth of loans.

Although the Fed had taken steps such as rate cuts to add liquidity to the banking system, commercial banks had avoided borrowing money from the central bank through its discount window, which makes loans to banks, out of concern that investors would see the move as an indication of the banks' underlying financial problems.

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