Fed drops discount rates, opens lending to primary dealers
Posted by: in Stocks Money NewsFiled under: Federal Reserve
The Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days
The board also authorized “the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities.” This may mean that the Fed will be exchanging capital for paper worth much less than a dollar being currently held on bank balance sheet.
The moves by the board are now a full bail-out and the only open question is how much money the agency will provide.
Douglas A. McIntyre
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