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Monday, October 6, 2008

Fed injects more billion into banks





The Federal Reserve announced on October 6, 2008 that it will increase by hundreds of billions of dollars the money it makes available to the nation's banks.

As the crisis in financial markets has become very acute, the Government is trying to provide all the liquidity that is needed so that banks don't become insolvent .

The Fed will allow banks to bid in an auction for the rate they're willing to pay to borrow the funds, and it will accept a much wider range of collateral for the loans than in other forms of lending by the central bank.


The Fed also announced it would pay banks interest on their reserve holdings. This would allow the central bank to have control over the fed funds rate, its key overnight lending rate target.
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