The Federal Reserve Wednesday extended its emergency borrowing program offered to the largest Wall Street firms and took additional measures to increase liquidity in the credit markets. The borrowing program began on March 17 and was due to expire in mid-September. It will now be continued through Jan. 30, although the Fed reserved the right to withdraw the program should it "determine that conditions in financial markets are no longer unusual and exigent."
Continue reading below
The program allows 20 investment banks that serve as primary dealers of federal government securities to tap the Fed's low-interest discount window for short-term liquidity needs. Another new program allowing the firms to replace riskier investments such as mortgage-backed securities with safe Treasury securities also will continue through Jan. 30.
Additionally, commercial banks will be permitted to bid on cash loans that last 84 days, longer than the 28-day loans currently available. The change in maturity for the Term Auction Facility will also be adopted by the European Central Bank and the Swiss National Bank.
The Fed also said it will make up to $50 billion in options available for primary dealers to bid on an option to borrow the Treasury securities. The options would be attractive to firms that aren't certain whether they will need the extra liquidity. - Bill McConnell
See press release
