–US Tsy’s Geithner: Action To Help Ease Pressure On EU Financial System

By Brai Odion-Esene

WASHINGTON (MNI) – There was just one dissent among members of the
Federal Reserve’s policymaking Federal Open Market Committee against the
decision Wednesday to take coordinated action with central banks from
developed nations to shore up liquidity in the global financial system.

In a statement to Market News International, the Fed said the FOMC
held a videoconference meeting Monday morning but one voting member,
Philadelphia Federal Reserve President Charles Plosser, was unable to
attend.

“The vote was 9-1, with (Richmond Fed President) Jeffrey Lacker
dissenting,” the Fed said, adding Lacker voted in place of Plosser.

The Fed and five other major central banks Wednesday announced
precautionary measures to better supply the world with dollars and the
Fed said it also has “a range of tools” to amplify liquidity for U.S.
financial institutions if necessary.

The Fed said the European Central Bank, the Bank of Japan, the Bank
of England, the Bank of Canada and the Swiss National Bank will pay 50
basis points less if they conduct dollar liquidity swaps, so the new
rate will be the overnight index swap (OIS) rate plus 50 basis points.

The Fed said the six central banks, “as a contingency measure” have
also agreed “to establish temporary bilateral liquidity swap
arrangements so that liquidity can be provided in each jurisdiction in
any of their currencies should market conditions so warrant.”

“U.S. financial institutions currently do not face difficulty
obtaining liquidity in short-term funding markets,” the Fed statement
said.

“However, were conditions to deteriorate, the Federal Reserve has a
range of tools available to provide an effective liquidity backstop for
such institutions and is prepared to use these tools as needed to
support financial stability and to promote the extension of credit to
U.S. households and businesses.”

U.S. Treasury Secretary Timothy Geithner praised the move, saying
in a statement that, “We welcome and support the actions taken by
Central Banks around the world today to help ease pressure on the
European financial system and help foster the global economic recovery.”

** Market News International Washington Bureau: 202-371-2121 **

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