Central Banks Join To Battle Credit Crisis, Stocks Surge
The Federal Reserve and five of the world's other major central banks just announced "coordinated actions ... to ease strains in financial markets" and make more credit available to consumers and businesses by pumping money into the global financial system.
In a statement released at 8 a.m. ET, the Fed says:
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity."
Translation, according to The Associated Press: The central banks are making it easier for financial institutions to get cash, especially dollars, that they can lend — hopefully at lower interest rates. The central banks are doing that, in part, by lowering the cost of "existing dollar swap lines by 50 basis points," Reuters adds.
The AP says: "Stocks surged following the news. Germany's DAX was trading 4 percent higher as were Dow futures in New York. The financial system has been showing signs of entering another credit crunch as Europe's debt crisis has shown alarming signs of spreading."