Federal Reserve extends banks’ emergency finance
The US Federal Reserve, America’s central bank, has extended the run of its temporary discount window of cheap financing for investment banks until the end of January 2009.
The Dow Jones industrial average rose 166.5 points to 11,564.1 following the Federal Reserve’s announcement.
The Fed’s Primary Dealer Credit Facility — known as the discount window — opened to securities firms in March in a bid to boost confidence in Wall Street banks as losses from the housing crisis snowballed, depleting their capital reserves.
Cheap financing was initially to be offered only until September but the central bank today extended the period “in light of continued fragile circumstances in financial markets”.
The extension is the latest sign of the US Government’s commitment to combating the credit crunch. The window was introduced at the same time as the Government moved to arrange a bailout of Bear Stearns by JPMorgan Chase.
The administration has also proposed to inject billions of dollars into Fannie Mae and Freddie Mac, the beleaguered mortgage groups, if necessary and gave taxpayers about $150 billion (?76 billion) of rebates to stimulate the economy.
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