August 22, 2:07 pm ET By Adam Schreck, AP Business Writer
JPMorgan Chase, Bank of America and Wachovia Join Citi in Borrowing $500M Each From Fed
NEW YORK (AP) -- Four major banks said Wednesday they each borrowed $500 million from the Federal Reserve's discount window, lending weight to its efforts to restore liquidity to tight markets.
Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wachovia Corp. each stressed they themselves have "substantial liquidity" and the ability to borrow money elsewhere.
In a joint statement, the latter three said they decided to borrow directly from the central bank to demonstrate "the potential value of the Fed's primary credit facility" and encourage its use by other banks. It was not clear if other banks had also decided to borrow from the Fed.
On Friday, the Fed took the dramatic step of cutting its discount rate on loans to banks, to 5.75 percent from 6.25 percent, in an attempt to alleviate Wall Street's credit crunch. It also made technical changes to make it easier for banks to get discount loans, including extending the credit period to up to 30 days.
Tapping the discount window had previously been seen as a last resort for banks in trouble, a perception the Fed sought to eliminate.
Citigroup was the first to announce its decision to borrow the money, "on behalf of its clients" at Citibank.
"Citi is pleased to inject liquidity into the financial system during times of market stress and to support creditworthy clients," the company said. "Citibank stands ready to continue to access the discount window as client needs and market conditions warrant."
It was followed minutes later by the three other banks.
"The companies believe it is important at this time to take a leadership role in demonstrating the potential value of the Fed's primary credit facility and to encourage its use by other financial institutions," their statement said. The three added that they hoped their actions would "promote broad acceptance of the use of the facility."
Subscribe to:
Post Comments (Atom)
1 comment:
For the avg person, I guess we no longer have to worry about bank runs like the old days, nobody has any significant money in them. The fed has to keep the the credit expansion going one way or another. Its not going to be enough to save the system with out drastic reduction in goverment spending and offshoring. Once a US company moves offshore, their contribution no longer leads to GDP, but rather adds to a the trade defecit. Mostly all of the employment being generated in the US is service oriented and low paying, and the US has limited manufacting as it is. Couple that with the hidden inflation tax to keep this system going doesnt leave much meat in the stew.
Post a Comment