New York – The Federal Reserve is becoming increasingly creative in its efforts to keep the world’s credit markets from shutting down.
The central bank’s latest effort is to show the world’s lenders it has faith in the highest quality debt – whether it’s issued by such institutions as Fannie Mae or a highly rated company.
Later this month, the Fed, in concert with other central banks in Europe, will offer to swap up to $200 billion in US Treasury securities for other debt including mortgage securities.
The move, which was met with wide approval on Wall Street, is essential to keep liquidity flowing at a time when some lenders are growing wary even of debt with the implicit guarantee of the US government. Without the Fed’s actions, there could have been a further deterioration of the nation’s housing market.