View Full Version : FED: Providing as many dollars as needed to central banks in Europe, the U.K.

9th May 2010, 07:37 PM
Fed Restarts Currency-Swap Tool With ECB Amid Crisis

May 9 (Bloomberg) -- The U.S. Federal Reserve said it will restart its emergency currency-swap tool by providing as many dollars as needed to central banks in Europe, the U.K. and Switzerland to help keep Europe’s sovereign-debt crisis from spreading to other markets.

The swaps with the ECB, Bank of England and Swiss central bank will allow them to provide the “full allotment” of U.S. dollars as needed, the Fed said today in a statement in Washington. A separate swap line with the Bank of Canada will support as much as $30 billion, the Fed said. The swaps were authorized through January 2011.

The Fed action came as European policy makers unveiled an unprecedented loan package worth almost $1 trillion to stop a crisis that threatened to shatter confidence in the euro. The Fed on Feb. 1 had closed all swap lines opened during the financial crisis triggered by the subprime-mortgage meltdown in 2007.

In a swap, central banks exchange foreign currency with an agreement to reverse the transaction at a later date. The central banks will then lend the dollars at fixed rates to firms in their countries. Dollar liquidity tightened in London last week amid concern financial institutions are holding too many assets of Europe’s most indebted nations.

The London interbank offered rate, or Libor, for three- month loans climbed 5.5 basis points to 0.428 percent, the highest level since Aug. 17, according to data from the British Bankers’ Association. It was the biggest increase since Jan. 16, 2009, and the 13th straight gain.

U.S. Pressure

The Fed’s swaps come at a time of increasing political scrutiny. Congress could ask why the U.S. central bank is expanding the supply of dollars to help smooth disruptions caused by fiscal imbalances in Europe.

Senator Bernard Sanders, a Vermont independent, wants the Government Accountability Office to look into Fed lending facilities during the crisis, including swap lines with foreign central banks, such as the $20 billion facility the Fed opened with the ECB in December 2007.

A vote on the Sanders amendment could come as soon as May 11 as Congress proceeds on the most sweeping overhaul of financial regulations since the Great Depression.

“Many members of Congress are deeply suspicious of the Fed’s interventionist instincts,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “Bailing out Wall Street caused enough resentment; appearing to bail out Greece would be even more problematic.”

“The Fed cannot afford to rile up its congressional critics while the financial reform bill is still in play,” Crandall said before tonight’s announcement.



9th May 2010, 08:11 PM
Man, it just never ends does it?

9th May 2010, 08:34 PM
Man, it just never ends does it?


It will on the day they stop mailing food stamps to half of America.


9th May 2010, 08:57 PM
Bank of Japan offers $21.6 billion in liquidity

HONG KONG (MarketWatch) -- The Bank of Japan offered to provide short-term liquidity for the second straight market session on Monday amid concerns over Greece's sovereign debt, according to reports. The central bank said it would inject about 2 trillion yen ($21.6 billion) into the money market, after it made a similar offer Friday. Monday's move came despite the BOJ's same-day fund operation drawing only 1.6637 trillion yen in bids Friday, below the central bank's 2 trillion yen offer, according to a Reuters report.

Japan printing more money out of thin air now to keep the game going another month...lol.


9th May 2010, 09:04 PM
Europe announces vast contingency fund, racing to contain crisis

ATHENS -- European finance ministers threw a trillion-dollar protective wall around the euro on Sunday and the European Central Bank said it would begin buying government bonds if necessary as officials on the continent struggled to contain the spread of a government debt crisis that began in Greece.

After a discussion that ran into the early morning Monday, the finance ministers, the ECB and the International Monetary Fund took separate steps meant to stanch a loss of confidence in European governments that had put the world's nascent economic recovery at risk.

A joint European Union-IMF program will give the 16 nations that share the euro access to nearly $1 trillion in loans if world bond markets abandon them and demand higher interest rates. That dynamic pushed Greece to a near-default before a $140 billion bailout by the IMF and Greece's European neighbors.


Trillion with a "T". On Mother's Day.