(RTTNews) - Emergency lending facilities will be extended beyond the New Year, the Federal Reserve announced Wednesday. The move was part of a concerted effort by the Fed, the European Central Bank, and the Swiss National Bank, to lend stability to as of yet shaky markets.

Federal Reserve chairman Ben Bernanke suggested that the emergency loan facilities could be extended in early July. At an FDIC conference on July 8, Bernanke announced that he was considering extending the duration of emergency loan facilities past their scheduled termination at the end of the year.

“We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail in dealer funding markets,” Bernanke said at the conference.

The news that both the Term Securities Lending and Primary Dealer Credit Facilities have been extended through January 30, 2009 are an indication that these “unusual and exigent” circumstances still exist in some financial markets.

“In light of continued fragile circumstances in financial markets, the Board has extended the PDCF through January 30, 2009, and the Board and the Federal Open Market Committee have extended the TSLF through that same date,” the announcement read. “These facilities would be withdrawn should the Board determine that conditions in financial markets are no longer unusual and exigent.”

In addition to extending the window, the Fed also said it is offering auctions of options on $50 billion draws on the TSLF. The TSLF was established in late 2007 as a temporary fix as dehydrated markets panted, searching for liquidity in during the grip of the credit crunch.

The Fed also introduced was the Temporary Auction Facility in late December, which currently offers $75 billion in 28-day credit in bi-weekly auctions. However, the restructuring announced Wednesday introduced a longer TAF, which will offer $25 billion in credit over an 84-day loan period.

The first 84-day TAF will take place on August 11. In order to facilitate the new auction facility, the Fed will temporarily reduce the amount auction at the 28-day credit TAF to keep the amount of TAF credit outstanding at $150 billion.

In addition, swap lines between the Fed and the ECB have been boosted by $5 billion, up to $55 billion from $50 billion.
The size of the SNB swap line will not change, remaining at $12 billion. Both swap lines are authorized through January 30, 2009.

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Posted in Categories: Economy, Eurozone, Forex, Releases, Switzerland, USA.

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