Fed Loans $50B to European Banks

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Fed Loans $50B to European Banks


WASHINGTON (AP)- The Federal Reserve (news - web sites) announced Thursday that $50 billion will be made available to European banks to help them meet emergency withdrawal needs.

Officials in the Bush administration expressed satisfaction with how the banking system has been functioning and said the resumption of trading in Treasury bonds went off without any problems on Thursday.

In an effort to prevent terrorist attacks from derailing the global economy, the Fed said it would make money available to European banks with subsidiaries in the United States. Dollars will be exchanged for euros, the new currency for 12 European countries.

While officials announced that the stock markets would remain closed until Monday - the longest period stock trading has been shut down since the Great Depression - they insisted that their monitoring of operations at U.S. banks and the global financial system showed few problems following the terrorist attacks at the World Trade Center in New York.

``We've suffered, as you know, quite a blow. But I think the financial systems have proven themselves quite resilient,'' Treasury Vice Chairman Roger Ferguson told reporters. He said that the financial systems had been functioning better than expected under the circumstances.

Private economists have expressed concerns that the terrorist attacks could push the U.S. economy, which has been struggling with weak economic growth for more than a year, into a full-blown recession.

The Fed also announced it had relocated its New York Fed operations to East Brunswick, N.J., after New York city authorities expressed concerns about possible structural problems at the New York Fed building, a landmark in the city's financial district which was located only a few blocks from the destroyed World Trade Center towers. Officials said the move had been accomplished with no disruptions to Fed operations.

The Fed's decision to make $50 billion available to European banks followed Wednesday's joint statement from the world's seven richest countries, pledging that their central banks would coordinate activities to make sure emergency withdrawals did not destabilize any of their banking systems.

Private economists predicted the Fed's efforts to supply additional money to banks would soon be followed by further interest rate cuts, possibly before the next Fed meeting on Oct. 2. The Fed has already cut interest rates seven times this year in an effort to jump-start economic growth.

-- K (infosurf@yahoo.com), September 13, 2001

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