Fed acts to take back liquidity added during credit crisis

March 09, 2010

NEW YORK - The Federal Reserve said Monday that it will make more financial institutions eligible for a program to drain some of the unprecedented liquidity it added to markets during the credit crisis. The move is intended to make the program, under which the Federal Reserve Bank of New York temporarily sells some of its securities, more effective. The New York Fed said that domestic money market mutual funds with net assets of $20 billion are eligible for the transactions, known as "reverse repurchase agreements." That's when the Fed sells securities from its portfolio with an agreement to buy them back later. The Fed launched dozens of programs to add liquidity to credit markets during the peak of the credit crisis in late 2008 after the market came to a standstill. The Fed is beginning to withdraw the measures now that the crisis has passed.

- Associated Press

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