Fed Boosts Cash Auctions to $900 Billion, May Do More (Update2)

[Dover]

Oct. 6 (Bloomberg) -- The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

``The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,'' the central bank said in a statement released in Washington today. Fed and Treasury officials are ``consulting with market participants on ways to provide additional support for term unsecured funding markets,'' the statement said.

Today's steps follow a hoarding of cash by banks that sent the premium on the three-month London interbank offered rate over the Fed's benchmark interest rate to a record. Industrial companies are also finding it harder to raise cash after the market for commercial paper shrank to a three-year low as investors flee even borrowers with few links to mortgages.

``It is pretty much all out war,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., New York. ``They are pulling out all the stops to try and get borrowers and lenders to meet and do transactions once again.''

Implementing part of last week's emergency legislation to shore up the financial industry, the Fed said today it will begin paying interest on the cash reserves banks hold at the central bank. The step should give Fed officials greater power to inject cash into banks without interfering with their benchmark interest rate, which stands at 2 percent....>

http://www.bloomberg.com/apps/news?pid=20601068&sid=aKehT8Q3KSLw&refer=home

[nradisic]

1. Print baby print!

What I cannot believe is the way the dollar has gained strength against all other currencies, even though we are printing dollars like crazy our currency is strengthening.

I import wine....so this means cheaper wine for all down the road.

[phantom power]

2. I can't figure that out either.

I suppose it would add up if the rest of the world is having economic problems as large as ours. Comforting thought.