G.O.O.D

Source: Reuters

The world’s top central banks said on Thursday they will pump more than $180 billion in extra dollar funds into global money markets in a coordinated effort to ease a funding squeeze triggered by the upheaval on Wall Street.

The European Central Bank joined forces with the U.S. Federal Reserve and the central banks of Canada, Switzerland, Japan and Britain to boost supplies of dollar funds in global financial markets.

The ECB and the Bank of England offered $40 billion in one-day dollar funds, and Swiss National Bank will add up to $10 billion in the central banks’ first-ever loans of overnight dollar liquidity.

The Fed said it was extending currency swap arrangements with other central banks by $180 billion to fund the extra liquidity operations, which come on top of central bank actions to pump in extra cash in their local currencies.

In a sign of the huge demand for sterling funds, banks bid 202.03 billion pounds for the 66.21 billion pound on offer in a Bank of England open market operation.

Well-oiled money markets, where banks lend short term funds to each other to smooth out daily swings in their balances, are crucial for the proper functioning of the financial system and the economy at large.

Banks around the world have responded to the squeeze, exacerbated by investors’ flight into safe havens of gold and government bonds, by flooding markets with cash and verbal reassurances, but so far with only limited success.

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From FT.com / World

Hoarding by banks stokes fears on credit crisis

By Chris Giles in London and James Politi in Washington

Published: March 25 2008 15:10 | Last updated: March 25 2008 20:36

Central banks’ efforts to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears that the recent respite in equity markets may not signal the end of the credit crisis.

Banks’ borrowing costs – a sign of their willingness to lend to each other – in the US, eurozone and the UK rose again even after the Federal Reserve’s unprecedented activity in lending to retail and investment banks against weaker than usual collateral and similar action in Europe.

Technorati Tags: Hoarding, central bank

From FT.com / Capital markets

Central banks on both sides of the Atlantic are actively engaged in discussions about the feasibility of mass purchases of mortgage-backed securities as a possible solution to the credit crisis.

Such a move would involve the use of public funds to shore up the market in a key financial instrument and restore confidence by ending the current vicious circle of forced sales, falling prices and weakening balance sheets.
The conversations, part of a broader exchange as to possible future steps in battling financial turmoil, are at an early stage. However, the fact that such a move is being discussed at all indicates the depth of concern that exists over the health of the banking system.

It shows how far the policy debate has shifted in recent weeks as the crisis has spread to prime mortgage assets in the US and engulfed Bear Stearns, the investment bank.