WASHINGTON — Fighting to ease a dangerous credit crisis, the Federal Reserve has provided $260 billion in short-term loans to squeezed banks since December to help them overcome credit problems.
The central bank announced the results Tuesday of its most recent auction — the eighth since the program started in December — where commercial banks bid to get a slice of $50 billion in short-term loans.
It’s part of an ongoing effort by the central bank to provide relief to a spreading credit crunch that has unnerved financial markets. The situation threatens to push the country into a deep recession. Counting the latest auction results announced Tuesday, the Fed has provided a total of $260 billion in short-term loans to banks.
In the most recent auction, commercial banks paid an interest rate of 2.615 percent, the lowest rate for any of the auctions of this kind conducted so far.
There were 88 bidders for the latest slice of the $50 billion in 28-day loans. Demand was high. The Fed received bids for $88.9 billion worth of loans.
The Fed, around the middle of December, announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump.
A global credit crisis has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.
The ill effects of housing and credit problems have made both people and businesses more cautious in their spending.
