FEDERAL RESERVE REACTS TO CREDIT CRISIS, PUMPS $200 BILLION INTO SYSTEM

The reaction to the Margin Calls last week had put tremendous pressure on the financial markets and the Federal Reserve just stepped up to ease the pressure. So far, the stock market is happy. Stocks are up over 2%. Is this a knee jerk reaction or will the market continue up?? It is always interesting to see how the markets react over time.

Hopefully this will bring interest rates back down. However, the bond market it getting killed today. Which typically brings rates up, however, interest rates are not fully linked to the bond market. Where the 10 note was you would expect mortgage rates as low as 5%.

This often bothers me. Mortgage rates don't always follow the bond rates down, but they seem to always follow bond rates up. Let's see what happens today???

Here is the AP report:
Fed Offers More Help to Banks
By JEANNINE AVERSA,
AP
Posted: 2008-03-11 09:31:41
Filed Under: Banking
WASHINGTON (March 11) - The Federal Reserve on Tuesday announced it is ramping up efforts to provide more relief to cash-strapped financial institutions, a coordinated action with other central banks aimed at easing a global credit crises that threatens to push the U.S. economy into its first recession since 2001. The Fed said it will make up to $200 billion in cash available to cash-strapped financial institutions. "Pressures in some of these markets have recently increased again," the Fed said in a statement. "We all continue to work together and will take appropriate steps to address those liquidity pressures." The other banks involved are the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank. In addition, the Fed has authorized increases in existing programs called "swap lines" with the European Central Bank and the Swiss National Bank "These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB respectively," the Fed said, extending the term of these swap lines through Sept. 30.
Read the full report at this link: http://money.aol.com/news/articles/_a/fed-offers-more-help-to-banks/20080311093009990001