The week Wall Street went into meltdown So Bernanke blinked.
One week on from the start of giant central bank liquidity injections and deus ex machina time rolls round again. The morning clouds lift with news that the Federal Reserve is cutting by 50bp the discount rate at which banks can raise emergency funds to 5.75% from 6.25%, leaving it just 50bp above the Fed funds rate, which is the general base rate.
In addition, it is to widen eligible collateral for these loans to include certain mortgage-backed securities. News emerges of a conference call this morning between Fed officials and the CEOs of leading financial institutions including Bank of America’s Ken Lewis, Citi’s Chuck Prince, JPMorgan’s Jamie Dimon and Lloyd Blankfein of Goldman Sachs. In the days ahead, the Fed will press the country’s leading banks to make use of this facility even if they don’t face a funding...
