WASHINGTON The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets.
The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so that they will keep lending to customers.
The new round of auctions will be conducted on June 2, June 16 and June 30.
The smooth flow of credit is the economy's lifeblood. It permits people to finance big-ticket purchases, such as homes and cars, and help businesses expand operations and hire workers.
Wanting to avert a broader panic that could endanger the entire U.S. financial system, the Fed has taken a number of extraordinary actions to provide relief. In its broadest extension of lending authority since the 1930s, the central bank agreed to temporarily let investment firms obtain emergency loans directly from the Fed, a privilege that only commercial banks had been granted.
The central bank is expected to focus more on these and other efforts to help banks and investment firms overcome any credit problems as it winds down an aggressive rate-cutting campaign that started last September.
To help bolster the economy, the Fed last month lowered a key interest rate by one-quarter percentage point to 2 percent. However, it signaled that may be the last reduction for some time. The Fed is hoping that its powerful rate cuts along with the government stimulus package of tax rebates will help lift the economy out of its funk in the second half of this year.