WASHINGTON — The Federal Reserve has announced that it isproviding liquidity to help calm the financial markets after itsrecent decision not to raise rates.

“The Federal Reserve is providing liquidity to facilitate theorderly functioning of financial markets,” according to a pressstatement. “The Federal Reserve will provide reserves as necessarythrough open market operations to promote trading in the federalfunds market at rates close to the Federal Open Market Committee'starget rate of 5-1/4 percent. In current circumstances, depositoryinstitutions may experience unusual funding needs because ofdislocations in money and credit markets. As always, the discountwindow is available as a source of funding.”

CUNA Chief Economist Bill Hampel told WUSA9 Television CBS News/TheStreet.com that the Fed's reaction was appropriate. “Not allthe debt out there is bad debt, but this mortgage scare has peopletreating everything like it's junk,” TheStreet.com quoted him assaying. “The banks have stopped doing anything while they do thesort of due diligence on these complex securities (mortgage-backedsecurities and other derivatives) that they should have been doingall along.”

Hampel predicted that the Fed would cut rates before long.