Feb 29, 2008 3:30 pm US/Central
Feds To Hold $60B Auction For Cash-Strapped Banks
WASHINGTON (AP) ―
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Federal Reserve Board Chairman Ben Bernanke pauses during a hearing before the House Budget Committee Jan. 17, 2008, on Capitol Hill in Washington, DC.
Alex Wong/Getty Images
The Federal Reserve announced Friday that it will auction another $60 billion in March as it continues to combat the effects of a severe credit crisis. It repeated a pledge to keep holding the auctions "for as long as necessary."
The central bank said it will make $30 billion available to cash-strapped banks at each of two auctions, on March 10 and 24.
The Fed began the new auctions in December in hopes that the increased supply of cash would prompt banks to keep lending and prevent a severe credit squeeze from making the current economic slowdown even worse.
Federal Reserve Chairman Ben Bernanke told members of Congress this week that the Fed has been pleased with the results of the new procedure.
In its announcement Friday, the central bank said that it intended to keep holding the auctions every two weeks "for as long as necessary to address elevated pressures" in the credit markets.
It said decisions regarding auctions in April would be announced by March 28.
The central bank has held six auctions so far, two each in December, January and February, providing $160 billion in extra reserves through short-term loans to cash-strapped banks.
The new process was adopted after the Fed had only limited success in encouraging banks to use its "discount window," where the Fed makes direct loans to commercial banks, after the credit crisis hit financial markets last August.
In its announcement Friday, the Fed said it was making some technical changes in an effort to improve the overall efficiency of the auction process. The changes deal with such issues as when information will be released to prospective bidders.
Going forward, details on the auctions will be released at 10 a.m. on the Monday when an auction is being held, with the bidding period shortened to two hours, from 11 a.m. to 1 p.m. Eastern time.
Previously, the auction details were released on the Friday before the Monday auction and the bidding period covered three hours.
The results of the auction will be announced at 10 a.m. on the Tuesday following each auction.
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