WASHINGTON (AFP) — The Federal Reserve on Tuesday injected 70 billion dollars of liquidity to help stressed financial markets, a move coming on the heels of similar actions by other central banks.
The Federal Reserve Bank of New York announced two separate operations of 50 billion and 20 billion dollars, moves aimed at keeping credit flowing for banks amid a credit squeeze.
The US central bank also had injected 70 billion dollars into financial markets amid turmoil Monday following the bankruptcy of Wall Street giant Lehman Brothers.
The Fed "stands ready to arrange further operations later in the day, as needed," a statement said.
The move came ahead of policy meeting of the US central bank. Many analysts expect a cut in the federal funds rate, currently at 2.0 percent, in a further effort to keep credit flowing in the strained financial system.
Earlier, the European Central Bank, Bank of England and central banks of Switzerland and Japan pumped billions into the markets for a second day Tuesday as it joined other central banks in trying to contain the fallout from the collapse of Lehman Brothers.
The operations came after Lehman Brothers filed for bankruptcy protection on Monday and after fellow Wall Street giant Merrill Lynch was bought by Bank of America to prevent it suffering a similar fate.
US insurance giant AIG was also reported to have sought a massive emergency loan to head off its own crisis.
The events sent shockwaves through markets and prompted central banks to provide the extra liquidity to keep banks lending to each other and avert a wider freeze-up of the entire financial system.
The New York Fed, acting on behalf of the Washington-based Federal Reserve central bank, said it agreed to a series of so-called "repurchase agreements" to ensure market liquidity.
The Fed provided cash to banks pledged against US agency and mortgage-backed securities.
The move steps up actions by the Fed begun last year when credit flows started seizing up as banks began reporting multibillion dollar losses and writedowns tied to the housing market's woes.
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