Page last updated at 17:30 GMT, Friday, 28 March 2008

$100bn Fed move over credit fears

Dollar bills
There Fed has upped the amount of cash available at auction.

The US Federal Reserve will make a further $100bn (50bn) available to major banks in April, trying to ease concerns about a global credit crunch.

The sum, offered across two auctions, is in addition to $260bn provided in short-term loans to the end of March.

Other unorthodox steps include the Fed allowing investment banks to borrow from it directly - previously only possible for commercial banks.

The financial crisis has caused chaos on US and global markets.

This month Bear Stearns became the highest profile US victim of the credit crunch - facing near collapse before a deal was struck for it to be bought at a bargain price by JP Morgan Chase.

The rescue was supported by the Fed, which agreed to buy up to $29bn of Bear Stearns debts.

The Fed's chairman, Ben Bernanke, will be quizzed about the auctions, and other Fed actions to ease the credit crunch, when he faces Congress next week.

Critics say that the central bank is bailing out banks who have not assessed their risks properly

Auctions continue

Since December the Fed has held auctions every two weeks, offering short-term loans to commercial banks.

The amounts offered began at $20 billion, rose to $30 billion and were hiked to $50bn in early March as the severity of the credit shortage grew.

They are set to continue until at least September.

The hope is that the extra cash will ease the fears that banks have of lending money to each other, which have pushed short-term interest rates to record highs, despite the Fed's series of interest rate cuts.

This week there were concerted moves by central banks to bring down the Libor - the rate at which banks lend to one another - which is currently close to the high levels at the beginning of the credit crunch.




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