By Bloomberg,
Central Banks Offer Extra Funds to Calm Money Markets (Update2)
By John Fraher and Simon Kennedy
Sept. 18 (Bloomberg) -- The Federal Reserve, the European Central Bank and the Bank of Japan united with their counterparts around the world to offer an additional $180 billion to markets facing their worst crisis since the 1920s.
The Fed said it authorized central banks to auction the funds to ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' Policy makers ``continue to work together closely and will take appropriate steps to address the ongoing pressures,'' a joint release said. The Bank of England, the Bank of Canada and the Swiss National Bank also participated.
Finance officials have struggled to restore confidence in markets this week as concern mounted more banks will follow Lehman Brothers Holdings Inc. into bankruptcy. The cost to hedge against losses on U.S. government debt climbed to a record yesterday, the U.K. government was forced to sponsor a rescue of mortgage lender HBOS Plc and Russia poured money into its banks.
``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''
Limit Doubled
The Fed said the ECB has been authorized to double its existing limit to $110 billion from $55 billion and the Swiss central bank can offer an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively.
The Bank of Japan said its dollar-swap agreement will be conducted ``appropriately in view of the prevailing market conditions.'' That statement was published after its policy board held an emergency meeting in Tokyo today.
The action is the latest attempt by central bankers to coordinate their response to the financial crisis. In December, they joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending.
The announcement boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. Europe's Dow Jones Stoxx 600 Index, which has dropped 8 percent this week, gained 0.8 percent to 260.15. Futures on the Standard & Poor's 500 Index added 1.2 percent. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31.
Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies and increasing lending to banks abroad.
``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said.
The markets gonna like this move, but again for how long? It is these coordinated actions that make taxpayers suffer and deprive the public proper utilization of funds, what happened to corporate governence and the function of a government?
Malaysia reacted well with these news with the come back of CPO and the positive sentiments implanted by the foreigns but i think some short-covering had to do with all the buying or else the last minute fizzle from - 5 to -11points should not be ignored , the market will give impression that no one will be allowed to fail with the government , not knowing that it is their money used to resuscitate the dead banks! Hang Seng was bouncing from a key support level of17500-16500, with the news it closed with almost no changes from a milestone up, lets see some updates :-
- first reactionof last nites closing
- US and Europe takes the baits( i quote More than $19 trillion has been wiped off global stock- market value but the valuation of CDOs are between 50 to 80 trillion, thats still a 4:1 ratio)- bankers are still not lending they are exploiting the loans by 302 basis.
- The very optimistic trader, confident and making profits in a bear market (pro)
- we are at that time of the year near festive season, retail should be a great indicator of the economy, visa, Amex, Master should benefit, but outlook is still gloomy for me to start buying.
- The devils advocate
- China's the giant to scoop, WB waiting people to strip
- Prepare to face the Axe, develop a great skill and sell it it is going to save your life
- Now they can solve things, dont do anything, Selling will ease at a point, how about when it is zero?
- No protectionism, if AIG can pull thru the crisis, the biggest beneficiary would be the feds and the nation, but how does profits transfer to the public?
- If fear and excuberant is an indicator, it would dominate all indicators
- Will he save Americans, traditionally elections in US and rallies run concurrently
- Job market
- Short sellers, are you the culprit?
- the oracle
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