Fed about to do more to ease credit crunch

March 11, 2008 10:10:08 AM PDT
The Federal Reserve is ramping up relief for squeezed financial institutions, coordinating with central banks to try to ease a global credit crises.It's a crisis that's threatening to push the U.S. economy into its first recession since 2001.

The Fed says it will make up to $200 billion in Treasury securities available to big Wall Street investment houses and banks, to try to make sure there's an ample supply of Treasury securities. Demand has grown for them, since they're considered the safest investment in the world because they are backed by the U.S. government.

The Fed's action propelled stocks upward on Wall Street with the Dow Jones industrials jumping more than 180 points in early afternoon trading.

The move comes as banks and other financial institutions face cash crunches.

"Pressures in some of these markets have recently increased again," the Fed said in a statement. "We all continue to work together and will take appropriate steps to address those liquidity pressures." The other banks involved are the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank.

The Fed has been working to pump billions of dollars into the banking system to aid an economy rocked by the subprime mortgage crisis and the severe tightening of credit.

A meltdown in the housing and credit markets has made banks and other financial institutions reluctant to lend to each other, causing a cash crunch. Financial companies wracked up multibillion-dollar losses as investments in mortgage-backed securities soured with the housing market's bust. Problems first started in the market for subprime mortgages- those made to people with blemished credit histories. However, troubles have spread to other areas.