Fed says it will pay interest on banks reserves

Mon Sep 29, 2008 10:01 AM EDT
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The Federal Reserve said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks by billions of dollars, fresh steps to help ease a painful credit crisis.

Congress in the $700 billion bailout bill President Bush signed on Friday gave the Fed the power to pay interest on those reserves for the first time. The law accelerated the effective date to October of this year versus in 2011.

The move was seen as another way to expand the Fed's resources to battle the worst credit crisis in decades. It will encourage banks to keep more resources at the central bank.

The Fed also said that 28-day and 84-day cash loans being made available to banks will be boosted to $150 billion a piece, effective Monday. Those increases will eventually bring the amounts outstanding under the program to $600 billion.

Loans that will be made available in November to banks also will be increased to $150 billion each. That makes a total of $900 billion in credit potentially outstanding over year end, the Fed said.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — The Federal Reserve says it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks, fresh steps to help ease a painful credit crisis.

Congress in the $700 billion bailout bill President Bush signed on Friday gave the Fed the power to pay interest on those reserves for the first time. The law accelerated the effective date to Oct. 1 of this year versus 2011.

The move was seen as another way to expand the Fed's resources to battle the worst credit crisis in decades. It will encourage banks to keep more resources at the central bank.

© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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{"commentId":3199321,"authorDomain":"r-atler"}
Rattlesnake

Hmm.... Someone asked how we're going to pay for the bailout (of which this is a part). The answer is quite simple - the govt is going to turn on the printing presses and print money. More money in circulation means your savings (and possessions which are dollar denominated) become worth less (or even perhaps worthless if things get bad enough - take a look at what's happening to the shareholders of WaMu). It also means that imports cost you more and that exports bring in less. This situation was created by a bunch of greedy individuals who valued their own welfare over that of the rest of the citizenry; these are folks who ran businesses (like Lehman Brothers) and folks in the government (in both political parties) who failed to regulate the financial industry and who (like Barney Frank) think that this country owes a nice house (or other amenity) to every citizen, regardless of their ability to afford a nice house (or other amenity). Those same folks are now in charge of writing the bailout bill (Chris Dodd received more money from Fannie May and Freddie Mac than anyone else, or so I'm told) and they are, once again, putting their welfare ahead of ours.

How do we pay for this? We start by holding Chris Dodd, Barney Frank, the Chairman of the SEC, Democrats, and Republicans accountable. The bailout bill should put limits on the salaries of EVERY CEO, not just the new ones who come into office after the bill is passed. We should have beneficial ownership in the companies that receive help, there should be limits on how the money is used, and the Federal Reserve should have NO power to do anything (it isn't even an elected or Constitutionally mandated organization!). Oh yeah, we need to seize the assets of every CEO or corporate officer and government official who benefitted from this mess and use those assets before we use any taxpayer assets in this bailout. And those who perpetrated this crime should spend the rest of their natural days at hard work in a prison and they and their families should be denied the opportunity to derive any benefit from the hell they have visited on the world.

{"commentId":3199321,"threadId":"371986","contentId":"1928736","authorDomain":"r-atler"}
    Reply#1 - Mon Sep 29, 2008 10:38 AM EDT
    {"commentId":3210015,"authorDomain":"iliketuandapril"}
    B-online

    It costs the government nothing to print money.
    As far as taxpayers...flat wages for 15 years means no magic wand and no dreamy safety net for us. For taxpayers? Just the daily grind...now and forevermore.

    The real reason the 'save Wall Street' (plus all of the big add-ons) bill did not pass was because of the verbiage. The bill (as written and defeated) is too open-ended to potentially create an even worse scenario in the financial markets...(and let us not forget the 'add-ons').

    After what has happened on Wall Street? The Chairman of the Federal Reserve should have *no* power to do anything on his own.
    The bill is {simply-put} poorly written, IMHO.

    {"commentId":3210015,"threadId":"371986","contentId":"1928736","authorDomain":"iliketuandapril"}
      Reply#2 - Mon Sep 29, 2008 4:50 PM EDT
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