WASHINGTON — In an attempt to slow the credit crunch, the Federal Reserve and several of its counterparts abroad pumped money into global markets today.
The Fed authorized a $180 billion temporary expansion of its reciprocal currency arrangements (swap lines) to provide additional funding for liquidity operations by other central banks: The Bank of Canada, the Bank of England, the European Central Bank (ECB), the Bank of Japan, and the Swiss National Bank. The other banks also pumped additional funds into the swamp lines.
"These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures," the Fed said in a statement released at 3:00 a.m. today.
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The action is a response to the declines in financial markets during a week that saw Lehman Brothers declare bankruptcy, the U.S. government bailing out insurance giant AIG and Merrill Lynch selling itself to Bank of America.
There may be additional changes in the financial marketplace as investment bank Morgan Stanley is in merger discussions with several banks and Washington Mutual is seeking a buyer.
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