Fed loan to banks set to double
TEXT OF STORY
Lisa Napoli: The already bad credit market took a turn for the worse last week. Now, the Federal Reserve is offering to come to the rescue. Here’s Marketplace’s Bob Moon:
Bob Moon: The nation’s monetary “doctors” have been pouring on the medicine in the form of interest-rate relief, but still haven’t been able to stabilize the credit market.
David Kotok: You’ve got to stop the bleeding before you can treat the patient.
At Cumberland Advisors, Chief Investment Officer David Kotok says that’s why, in the weeks ahead, the $160 billion the Fed’s already loaned to struggling banks will be almost doubled.
Kotok: This is raw cash going right to the banks from the Federal Reserve.
Banks need that direct infusion because they see themselves as being in no condition to give up their own life blood:
Kotok: Banks worry about lending to each other. They’re worried about risk. What the Fed has done is said, “Look, come right to us and we’ll loan money right to you.”
It might not cure the credit market, but does help keep it alive.
Wrightson ICAP chief economist Lou Crandall:
Crandall: The Fed’s been trying to buy time for months now, and they’ll continue to try to do that.
But Crandall says what’s still not clear is how much time the banks will need to recover.
In Los Angeles, I’m Bob Moon for Marketplace.
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