Fed lends helping hand to Europe
By Jeannine Aversa |
May 11, 2010, Tuesday
|
Print Edition
Print Edition
THE United States Federal Reserve late Sunday opened a program to ship US dollars to Europe in a move to head off a broader financial crisis on the continent.
Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan also are involved in the dollar swap effort.
The move comes after the European Union and International Monetary Fund pledged a nearly US$1 trillion defense package for the embattled euro, hoping to calm jittery markets and halt attacks on the eurozone's weakest members.
The ECB also jumped into the bond market on Sunday night, saying it is ready to buy eurozone bonds to shore up liquidity in "dysfunctional" markets.
The Fed's action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.
The Fed said action is being taken "in response to the reemergence of strains in US dollar short-term funding markets in Europe," and to prevent the spread of that strain to other markets and financial centers.
A so-called "swap" line with the Bank of Canada provides up to US$30 billion. Figures weren't provided for the other central banks. The arrangements are authorized through January 2011.
Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan also are involved in the dollar swap effort.
The move comes after the European Union and International Monetary Fund pledged a nearly US$1 trillion defense package for the embattled euro, hoping to calm jittery markets and halt attacks on the eurozone's weakest members.
The ECB also jumped into the bond market on Sunday night, saying it is ready to buy eurozone bonds to shore up liquidity in "dysfunctional" markets.
The Fed's action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.
The Fed said action is being taken "in response to the reemergence of strains in US dollar short-term funding markets in Europe," and to prevent the spread of that strain to other markets and financial centers.
A so-called "swap" line with the Bank of Canada provides up to US$30 billion. Figures weren't provided for the other central banks. The arrangements are authorized through January 2011.
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