With the credit crunch continuing to dog banks, the Federal Reserve Board took actions Monday intended to inject more liquidity into the system.
The central bank said it will expand its cash auctions by $50 billion, to $75 billion, beginning Oct. 6. The Fed also said it would create two "forward auctions" that would total $150 billion and take place in November. The cash sales the Fed has conducted for nearly a year typically settle within one to two days, but banks that participate in the new "forward auctions" would not receive their money for several weeks. The idea is that, with the longer wait, the program will "provide reassurance to market participants that term funding will be available over yearend," according to a Fed press release.