The U.S. Federal Reserve's effort, in coordination with the European Central Bank and three other central banks, to add liquidity by special and traditional means represents a prudent step to maintain properly functioning credit markets, economists and analysts told BloggingStocks on Wednesday.
Further, the move is the largest coordinated international monetary policy action taken since the world's major central banks provided liquidity to ensure proper market function following the September 11, 2001, terrorist attack on the United States.
The Fed announced Wednesday that it would inject up to $40 billion in reserves into money markets via a new, temporary program called a "term-auction facility." The emergency funds would be made available to banks next week via auction process -- $20 billion each -- on December 17 and December 20. The Fed also said it is setting up lines of credit with the European Central Bank and the Swiss Central Bank that could be used for additional resources.
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