Industry News

Federal Reserve to loan banks $60 billion

Stepped-up lending intended to address credit crunch

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With a surge in unemployment and rising oil prices as a backdrop, the Federal Reserve announced today it will make $60 billion in short-term loans available to banks this month -- half again as much as offered in December -- as the credit crunch shows few signs of easing. To address fears about deteriorating credit markets, last month the Federal Reserve and four other central banks said they would inject more than $90 billion in liquidity into financial markets. The Fed made $40 billion in loans available to commercial banks in auctions held Dec. 17 and Dec. 20. The auctions -- in which the funds available for 28-day loans go to the banks willing to pay the highest interest rates -- made it possible for banks to borrow at an average interest rate of 4.65 percent in December. That's slightly less than the 4.75 percent rate the Fed charges for short-term loans at the "discount window," which some banks are reluctant to use because it's viewed as a last resort. The Fed ha...