In a joint effort to relieve fears about deteriorating credit markets, the Federal Reserve and four other central banks said today they will inject more than $90 billion in liquidity into financial markets in coming weeks.

In the U.S., the Fed said it will make up to $40 billion available to commercial banks in auctions to be held Dec. 17 and Dec. 20. Additional auctions will be held Jan. 14 and Jan. 28, with amounts to be determined.

As fears about losses in securities backed by mortgage loans and corporate debt mount, banks have become reluctant to lend money to each other. Although the Fed cut two key short-term rates Tuesday — the federal funds rate and the discount rate — a sell-off in global markets followed the decision as many investors expected deeper cuts.

The auctions announced by the Fed today will allow any depository institution judged to be in “generally sound financial condition” by their local Federal Reserve Bank — and eligible to borrow under the primary credit discount window program — to obtain loans on 28- or 35-day terms using a wide variety of collateral, including mortgage-backed securities.

“By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress,” the Fed said in announcing the plan.

The European Central Bank and central banks in England, Canada and Switzerland said they are planning similar steps.

U.S. stock indexes were up sharply this morning after the joint plan was announced, but had given up most of the gains by midday.

The Federal Reserve’s Open Market Committee also authorized a $20 billion temporary currency swap line with the European Central Bank and a $4 billion currency swap with the Swiss National Bank, which will allow overseas banks to borrow more U.S. dollars.

The European Central Bank said it would use the swap line to conduct auctions for $20 billion in loans in U.S. dollars on Dec. 17 and Dec. 20, while the Swiss National Bank will offer a $4 billion U.S. dollar repo transaction on Dec. 17.

The Bank of England announced plans to nearly quadruple the scale of previously scheduled auctions in which banks will be offered the opportunity to borrow cash for terms of 3, 6, 9 and 12 months.

England’s central bank said it will boost the reserves to be offered in Dec. 18 and Jan. 15 auctions, from £2.85 billion to £11.35 billion (about $23 billion U.S. dollars). The Bank of England will accept a broader range of collateral for £10 billion in loans it expects to make with 3-month maturities, including AAA-rated securities issued by U.S. mortgage financers Fannie Mae and Freddie Mac, and mortgage-backed securities issued in the United Kingdom and Europe.

The Bank of Canada said it will also expand the list of securities eligible as collateral for a $2 billion auction to be held Dec. 13 and a $1 billion auction on Dec. 18 to include Canada Mortgage Bonds and mortgage-backed securities with National Home Act (NHA) guarantees.

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