US Federal Reserve hands out another $20 billion

Saturday December 22, 2007

The sub-prime mortgage disaster has had far reaching repercussions around the globe with a host of central banks pumping billions into the money market to reignite consumer confidence.

American and European banks have been snapping up low interest short-term loans from central banks to fund loans as the banks have been hesitant to lend amongst themselves in the wake of the global credit crunch that has been gaining momentum since August.

The US Federal auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent, following up from their auction of $20 billion on Monday at a discounted interest rate of 4.65 percent.

There will be two more "auctions" in January with Fed officials committed to continuing with more auctions for as long as necessary.

There is certainly no shortage of takers for the loans with the central bank announcing they had received 73 bids for $57.7 billion worth of loans yesterday, despite only offering $20 billion. It was a similar scenario early in the week when they had 93 bidders seeking $63.6 billion.

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