WASHINGTON — Focused on getting the nation’s credit gears working smoothly again, the Federal Reserve is letting Wall Street firms draw emergency loans into next year and giving financial companies more options to help them overcome credit problems.
The Fed’s announcement Wednesday marks its latest effort to get credit flowing more freely. A global credit crisis that erupted last August has hobbled the U.S. economy, already reeling from a housing meltdown.
As financial companies have racked up multibillion-dollar losses on soured mortgage investments and credit problems have spread to other areas, firms have hoarded cash and clamped down on lending. That has crimped spending by people and businesses, which in turn has weighed on the national economy — a vicious circle the Fed desperately wants to break.
To that end, the Fed announced that investment houses can now tap the central bank for a quick source of cash through Jan 30.
Originally, the program that started March 17 was supposed to last through mid-September.
Another program in which investment firms can temporarily swap more risky investments for super-safe Treasury securities also will continue through Jan. 30, the Fed said. And it will let commercial banks, in a separate program, bid on cash loans that last longer — for 84 days, besides the 28-day loans now available.
The Fed said it was taking these steps “in light of continued fragile circumstances in financial markets.”
