A rescue package that's 'unlimited'

Dollar bill notes pass through a printing press at the Bureau of Engraving and Printing in Washington, D.C.

TEXT OF STORY

Kai Ryssdal: After almost a year of a couple of hundred billion dollars here and a couple hundred billion dollars there trying to unstick the credit markets. We now know exactly how far the Federal Reserve's going to go to fend off financial disaster. Apparently, the sky's the limit. Our own central bank is now offering to loan its European counterparts an unlimited flow of dollars. Unlimited as in unlimited. The Fed made the announcement this morning along with the European Central Bank, the Bank of England and the Swiss National Bank. But they promise it's not some kind of colossal handout.
Our senior business correspondent Bob Moon reports.


Bob Moon: So how much do you need? Uncle Sam has all the crisp bills you could use. Banks here in this country have been hearing that for months now, but there may be a bigger problem developing with the flow of greenbacks outside our borders. So the Fed is agreeing to swap as many dollars as necessary for euros and British pounds. It's not that there's not enough money to go around over there. It's just that the dollar is still the international currency of choice.
Mark Sunshine heads the financial services firm First Capital.

Mark Sunshine: Companies in the euro zone buy and sell and trade certain commodities, like oil, in dollars. Another example would be when Boeing wants to sell an airplane, or airplane parts. Right now, those European airlines can't get enough dollars to literally be able to buy an airplane.

The promise of an unlimited supply was clearly welcomed on global markets today. Sunshine says it's about time the rescue operation started focusing on Europe.

Sunshine: The European Central Bank, as well as European government leaders, have sort of been hiding under a rock and hoping that the financial services crisis was really an American phenomena and didn't apply to them. And very drastic, sort of catch-up action is needed.

At Global Insight, chief economist Nariman Behravesh says this isn't free money. Borrowers will have to put up collateral, and he says unlimited doesn't necessarily mean permanent.

Nariman Behravesh: Everybody understands these are temporary kind of provisions, and that at some point the Fed will take the money back when it's no longer needed. When the panic has subsided, if you will.

For now though, Behravesh says the move should help make up for the hoarding of dollars overseas, by both banks and investors.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...