Source AP ©

Federal Reserve auctions another $25 billion in loans to squeezed banks

The Federal Reserve has auctioned another $25 billion in loans to squeezed banks to help them overcome credit problems.

The central bank on Wednesday released the results of its most recent auction. It is part of an ongoing program started in December that seeks to ease financial turmoil and credit stresses. Those programs - along with the depressed housing market - have shaken the economy, forcing companies and people to clamp down.

In the latest auction, commercial banks paid an interest rate of 2.530 percent for the 28-day loans. There were 53 bidders. The Fed received bids for $46.24 billion worth of the loans.

On Tuesday, the Fed auctioned $25 billion worth of 84-days loans to banks.

The Fed in mid-December announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and help them over the credit hump. In late July, the Fed expanded the program, making the longer 84-day loans available, besides the existing 28-day loans.

The worst global credit crisis seen in decades has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.

The smooth flow of credit is the economy's oxygen. It permits people to finance big-ticket purchases, such as homes and cars, and helps businesses expand operations and hire workers.

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