Fed pumps more money into financial markets

Central bank loans $200 billion to big investment firms to promote liquidity. But measures aren't prompting banks to increasing lending.

The Federal Reserve on Tuesday announced yet another measure to pump more liquidity into the jittery financial markets.

The program will lend up to $200 billion of Treasurys to primary dealers, a group of 20 big investment firms, for a 28-day term. The firms can put up as collateral mortgage-backed securities issued by Fannie Mae and Freddie Mac, which generally are seen as safe because of an implicit government guarantee.

But in an unusual move, AAA-rated mortgage securities issued by banks will also be accepted. Many investors have shied away from these mortgage-backed securities because they fear defaults in the underlying assets will erode the value.

Read Complete Story