It's raining dollars, hallelujah
"The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a fresh coordinated bid to ease financial markets facing their worst crisis since the 1920s.
"The Fed increased the amount of dollars that European Central Bank, Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated.
"Finance officials have struggled to restore confidence in markets this week as investors stockpiled money amid mounting concern more banks will follow Lehman Brothers Holdings Inc. into bankruptcy. The cost to hedge against losses on U.S. government debt climbed to a record yesterday, the U.K. government was forced to sponsor a rescue of mortgage lender HBOS Plc and Russia poured money into its banks.
"There's a complete lack of faith in the markets," said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. "There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act."
"The rate on overnight dollar loans fell to about 2 percent as of 10:40 a.m. in London from around 5 percent before the announcement, according to Guillaume Baron, a fixed-income strategist who specializes in money markets for Societe Generale SA in Paris.
"The Fed will spray the dollars around the world via swap lines with other central banks who can then auction them in their own markets. The ECB, BOE and SNB offered at a total of $90 billion for one day today.
"Under the new arrangements, the ECB can now double its existing limit of dollars it gets from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30."