Fed Providing Liquidity

What a  timing for providing additional liquidity.  The fed is working with other central banks to provide more liquidity. 

So even as there are more write-downs, the markets are up.  And so is gold.  I guess you can inflate your way of this crisis.

The Fed also said it had created reciprocal "swap" lines with the European Central Bank, for $20 billion, and the Swiss National Bank, for $4 billion. These will enable the ECB and SNB to make dollar loans to banks in their jurisdiction, in hopes of putting downward pressure on interbank dollar rates in the offshore markets, principally the London Interbank Offered Rate, or Libor, market. The inability of foreign central banks to inject funds in anything other than their own currency has been a factor creating the squeeze on bank funding in those markets.

The new loans will be auctioned off with a minimum rate linked to the expected actual federal funds rate over the duration of the loan. Since the federal funds rate is expected to decline over the next two months, when the loans will be outstanding, the loan rate could end up being close to or even below the current federal funds rate.

Nonetheless, its potential importance has grown given Wall Street's negative reaction to the quarter-point cuts the Fed announced Tuesday in the federal funds rate target and discount rate, to 4.25% and 4.75%, respectively. Blue chip stocks tumbled 2% and treasury yields plunged as investors bet the Fed would ultimately have to cut rates far more to catch up with a sinking economy.

It remains unclear whether the new operation will do the trick. But the early reaction was favorable: Treasury bond prices plunged and their yields shot up in early trading, a sign that investors are abandoning the relative safety of Treasurys and preparing to bid up riskier debt. Futures markets suggested stocks would rise at the opening.