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 released the results of its most recent auction. It's part of an ongoing program started in December that seeks to ease financial turmoil and credit stresses. Those problems along with the deep housing slump have badly pounded the economy, forcing companies and people to hunker down.
In the latest auction, commercial banks paid an interest rate of 2.350 percent for the 28-day loans. There were 70 bidders. The Fed received bids for $90.56 billion worth of the loans. The auction was conducted on Monday with the results made public 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 oxygen. 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 in March to temporarily let investment firms obtain emergency, overnight loans directly from the Fed, a privilege that only commercial banks had been granted.
More recently, the Fed said it would allow troubled mortgage giants Fannie Mae and Freddie Mac to tap its emergency borrowing program if they needed cash to stay afloat. The companies haven't done so. Congress, meanwhile, has passed a sweeping housing rescue package that includes a backup bailout plan for Fannie and Freddie should they take a serious turn for the worse.
The collapse of the housing market, which dragged down home prices and propelled foreclosures to record highs, has forced financial companies to take huge hits from soured mortgage investments. Merrill Lynch & Co. announced plans to write down another $5.7 billion tied to bad mortgage debt. The company plans to issue new stock to raise $8.5 billion, part of efforts to get its balance sheet back in order and overcome credit stresses.