The Fed raises the amount on offer for the TAF from $30 billion to $50 billion, bringing the size of the facility to $100 billion.
The stock market took cheer briefly, but as of this writing, the Dow has retreated back into negative territory.
The Federal Reserve plans to increase its loans to banks this month to offset a deepening credit crisis threatening to tip the U.S. economy into a recession.
The central bank increased to $50 billion each from $30 billion the amount intended for auctions of funds planned for March 10 and March 24. The Fed also said in a statement in Washington today that it will make $100 billion available through weekly 28-day repurchase agreements, where the central bank lends cash in return for assets such as Treasuries.
The decision is the central bank’s latest attempt to reduce the threat to the economy from banks curtailing loans to companies and households. Banks and securities firms have posted losses exceeding $181 billion since the start of last year as the impact of surging defaults on subprime mortgages rippled through world financial markets.
“Given what we have seen in terms of illiquidity in the financial markets in the last four or five days, this came right in time,” Ajay Rajadhyaksha, head of fixed income strategy at Barclays Capital in New York, said in an interview with Bloomberg Television…..
Fed officials said today’s announcement wasn’t related to the Labor Department’s jobs report, and was aimed at addressing the deterioration in credit markets. The officials, speaking on condition of anonymity in a conference call with reporters, also said the measures won’t expand the Fed’s balance sheet…..
Officials said they will keep the benchmark federal funds rate target around the level set by the FOMC, indicating they don’t plan for the liquidity measures to drive the rate lower