Fed eyes extending emergency loans for Wall Street
Mon Jul 14, 2008
WASHINGTON (AP) — The Federal Reserve is considering giving squeezed Wall Street firms more time to draw emergency loans directly from the central bank to help them overcome credit problems, chairman Ben Bernanke said Tuesday.
In an extraordinary action, the Fed in March agreed to let investment houses go to the Fed — on a temporary basis — for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.
"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end" should stresses in credit markets continue, Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.
The Fed's decision to act — temporarily at least — as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.
Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.
Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.
Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.
In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.
Source : http://ap.google.com/
|
