Fed Pumps $41B into US Financial System

Discussion in 'Wall St. News' started by Martin Gale, Nov 1, 2007.

  1. WASHINGTON - The Federal Reserve pumped $41 billion into the U.S. financial system Thursday, the largest cash infusion since September 2001, to help companies get through a credit crunch.


    The action comes one day after Fed Chairman Ben Bernanke and all but one of his central bank colleagues voted to slice a key interest rate for the second time in six weeks to protect the economy from the ill effects of collapse in the housing market, aggravated by the credit troubles.

    The cash injection also came as Wall Street took a nosedive Thursday. The Dow Jones industrials were down more than 260 points in afternoon trading.

    The Fed on Wednesday ordered its key rate, called the federal funds rate, to be lowered by one-quarter percentage point to 4.50 percent. That followed up on a bolder, half-percentage point cut in September. Those two rate reductions might be sufficient to help the economy make its way safely through trouble spots, Fed policymakers indicated.

    The funds rate affects many other interest rates charged to millions of individuals and businesses and is the Fed's most potent tool for influencing economic activity.

    The Federal Reserve Bank of New York, which carries out the central bank's open market operations, moved Thursday to inject $41 billion in temporary reserves into the U.S financial system. It came as part of ongoing efforts designed to ensure that the markets — which have suffered through a period of turbulence over the last few months — function smoothly. The cash infusion came in three separate operations.

    A New York Fed spokesman said it was the largest single day of operations since $50.35 billion was pumped into the system on Sept. 19, 2001, following the terror strikes on New York and Washington. He declined further comment.

    Fed policymakers at their meeting on Wednesday noted that the "strains from financial markets have eased somewhat on balance." Still many Fed officials in the last week have described the state of financial markets as fragile. Bernanke and other Fed officials have said it will take time for the markets to fully recover from the credit crisis.

    Since August, the Fed has been pumping cash into the financial system to help ease strains from the credit crunch. It also has cut its lending rate to banks — a third such cut came on Wednesday. The Fed also has ordered two reductions to its most important interest rate, the funds rate, to help the situation.
  2. Wonderful. Print more and more money. Screw responsible business and common sense. With the rate of inflation, americans will be using monopoly money in a few years. I would love to see the M3 statistic the Fed has been hiding from us.
  3. Good move

    as they say dont fight the fed
  4. curbs on, curbs off, fed pumping, exchange halts during good moves.. etc. this market has gone to shyte and barely worth the perpetual hazard any more. the whole thing is leverage

    finding the real move underneath the leverage is like looking at the fragments of an explosion and identifying what it was that got shredded. at least intraday imo
  5. S2007S


    what a great move that was. Keep pumping in more money, this will help the problem, it always does. No matter how big the problem, the only way to fix it is to print more money.
  6. S2007S


    If it were no for these massive injections the markets would be down on the year, the money they continue to inject is propping up markets everywhere. I think the dow would still sitting between 10500 and 12k.
  7. bellman


    Excuse my ignorance, how does one pump $41 million into the financial system? How is it distributed? Seriously
  8. bellman


    Okay, after a little reading, it appears this is a loan, but I see no mention of the interest to be paid on the loan issued by the federal reserve of new york, but why would the news bulletins not provide more details of the arrangement, such as the time frame and the interest to be paid?
  9. How about you post the maturing repo # as well too. Take the difference of those two numbers and that is the figure that was added/subtracted to the system.

  10. Fed purchased $41b worth of 'high-quality' collateral from the member banks.

    If anyone can provide a link to the actual details of the purchase, I'd greatly appreciate it
    #10     Nov 1, 2007