WASHINGTON The Federal Reserve has auctioned another $75 billion in loans to squeezed banks to help them overcome credit problems.
The central bank on Tuesday announced the results of its most recent auction the 13th since the program started in December. It's part of an ongoing effort to ease financial turmoil and credit stresses.
In the latest auction, commercial banks paid an interest rate of 2.26 percent for the short-term loans. There were 73 bidders for the slice of the $75 billion in 28-day loans. The Fed received bids for $95.9 billion worth of the loans. The auction was conducted on Monday with the results released on Tuesday.
In mid-December the Fed announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump. A global credit crunch has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.
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 in late April 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.