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July 25, 2008 10:00:09 PM CDT

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Fed Cuts Bank Discount Rate to Boost Liquidity

Posted Mar 16, 08 7:21 PM CDT in Business 

(Newser) – The Federal Reserve raced to buck up an anxious financial sector today by cutting its discount rate to banks by a quarter point, to 3.25%, the AP reports. It also created a new lending facility to aid investment banks with short-term loans. The moves are "designed to bolster market liquidity and promote orderly market functioning," the Fed said. "Liquid well-functioning markets are essential for the promotion of economic growth."

The lending facility will be active for a minimum of 6 months and "may be extended as conditions warrant," said the Fed. It will accept a variety of collateral to support the loans. The rate cut comes 2 days ahead of the Fed's monthly meeting and applies only to short-term loans that institutions get from the Fed.

Source Associated Press

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Federal Reserve Chairman Ben Bernanke speaks at the National Community Reinvestment Coalition annual conference, Friday, March 14, 2008, in Washington.   (AP Photo/Pablo Martinez Monsivais)
Federal Reserve Chairman Ben Bernanke pauses as he speaks at the National Community Reinvestment Coalition's annual conference, Friday, March 14, 2008, in Washington.   (AP Photo/Pablo Martinez Monsivais)
Federal Reserve Chairman Ben Bernanke speaks at the National Community Reinvestment Coalition annual conference, Friday, March 14, 2008, in Washington.   (AP Photo/Pablo Martinez Monsivais)
Federal Reserve Chairman Ben Bernanke testifies before the House Financial Services Committee about the latest measures to heal the U.S. economy, on Capitol Hill in Washington in this file photo from...   (AP Photo/J. Scott Applewhite)
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US economy  • Federal Reserve  • Ben Bernanke  • interest rate cut  • liquidity  • federal loans



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