Central banks pump cash for cheap

Jill Barshay Dec 20, 2007
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Central banks pump cash for cheap

Jill Barshay Dec 20, 2007
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Doug Krizner: This week, the world’s key central banks have pumped massive sums of money into the global financial system. It’s their attempt to ease the credit crunch. As Jill Barshay reports, the Fed’s back at it today with another $20 billion.


Jill Barshay: By the end of the day, the Fed will have pumped a total of $40 billion into the financial system this week. It’s part of an effort by central banks around the world to unclog the credit markets. Europeans doled out a half a trillion dollars.

Vincent Reinhart at the American Enterprise Institute says things are so bad in the market right now that central banks are lending money at bargain rates.

Vincent Reinhart: Central banks don’t like being the first line of recourse for depository institutions that need funds. It’s supposed to be a penalty rate.

Despite all the money being poured into the system, global credit markets are still locked up. Reinhart says one good sign is that the rate at which banks lend to each other has fallen. But it’s only come down a little.

He says institutions need to disclose all their subprime mortgage losses. That’s what it will take for banks to regain their confidence and start lending to each other again.

In New York, I’m Jill Barshay for Marketplace.

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