The cash infusion, which has been injected in three separate operations, was the most since September 2001, according to an official from the Federal Reserve Bank of New York, which handles such operations for the US central bank. The Fed serves as the banking industry’s lender of last resort, providing money to financial institutions when other sources of credit are difficult to obtain. It typically buys billions of dollars worth of securities from major banks, injecting extra cash into the banking system, which the banks are obliged to repurchase at a later date.
Since early August this year, when the credit crunch took a turn for the worse, the Fed has pumped large amounts of cash into the financial system to help ease tightening credit that stems from the troubles in the US high-risk subprime mortgage market, which offers loans to people with lower credit and income. In the past two months, the central bank has also cut a key interest rate twice, by a total of 0.75 of a percentage point to 4.5%, to give borrowers some breathing space. (people.com.cn)
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