Fed May Extend Emergency-Loan Program into Next Year

[pennypinch]

Ben S. Bernanke, Federal Reserve Chairman is trying to ease concerns over the state of the nation's financial system. They are looking to extend the emergency-loan program for investment banks well into 2009. He says the Federal Reserve is very committed to stability financially and has several options to consider.

Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank. The Treasury should ``take a leading role in any such process'' in consultation with regulators, he said. Such a resolution mechanism may help reduce concern that investors and dealers begin counting on Fed aid in case their bets go wrong.
The Fed started the unprecedented lending programs for investment banks in March under its authority to lend to nonbanks in ``unusual and exigent circumstances.'' Officials said at the time the Primary Dealer Credit Facility, which provides direct loans, would last for ``at least'' six months.

By Scott Lanman

Congress may have the Fed be responsible for insuring the stability of the financial markets.

The Fed and SEC will come together to set guidelines and rules for capital, liquidity and funding of investment banks.

Fed May Extend Emergency-Loan Program into Next Year