A New York Stock Exchange trader looks on minutes before the Federal Reserve cut interest rates by one-quarter of a percentage point today.
A New York Stock Exchange trader looks on minutes before the Federal Reserve cut interest rates by one-quarter of a percentage point today. - 
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Doug Krizner: For weeks, the talk on Wall Street has been about the Fed cutting interest rates. A quarter-point cut at the December meeting was a no-brainer. Had to have it.

Credit markets have been like ice since the collapse of subprime mortgages. But when the Fed delivered a quarter-point cut yesterday, the market puked. Why? Well, some had been hoping for a larger cut in that key overnight rate. There was also hope of a bigger cut in another rate, the one the Fed charges banks when they borrow.

Let's bring in Jamie Chisholm of the Financial Times. Jamie, markets seemed unconvinced the Fed's doing enough to fix the credit crunch. But you're reporting the Fed has something up its sleeve.

Jamie Chisholm: Well, we have in our paper a story which suggests that the Fed recognizes that people are still concerned about the credit crunch. And they are looking, we believe, to introduce a new facility which will fundamentally overhaul the way it provides liquidity to the financial markets.

Krizner: So when we say liquidity, what we're really talking about is the Fed injecting cash into the financial system.

Chisholm: Well the thing is, the discount window is . . . it holds a bit of a stigma. This is where banks could go to the Fed if need be, they pay the slightly penal rate and they can borrow from the Fed. We understand that the Fed are going to look into introducing new facility which will allow various banks, institutions to come with various types of collateral and borrow money in a slightly more anonymous way.

Krizner: What is the hope, then? That the banks will take advantage of this and that this will somehow relax what we're calling the credit crunch?

Chisholm: Well, exactly. I mean, at the moment, the fear is that the Fed is prepared to lend money, but what is happening is that the money's there, but it's not getting through the veins to the arteries. It's not flowing into the overnight market. What we're seeing is the market's very sclerotic, to continue a sort of medical analogy, and what they're trying to do, they want to try to get the flow of blood through the banks into the places they need to go. And they're aware this needs to be done, so this is what this facility is intended to try and do.

Krizner: Jamie Chisholm is deputy markets editor for The Financial Times in London. Jamie, thanks so much for speaking with us.

Chisholm: No problem.