Fed in emergency discount rate cut; critics slam ‘desperate’ acts

WASHINGTON, March 16, 2008 (AFP) – In a rare Sunday action aimed at heading off fresh market upheaval, the Federal Reserve cut a key rate for direct loans to certain financial institutions and said it would offer immediate liquidity to the brokerage system. “Today’s moves by the Federal Reserve are the desperate acts of failing men. The threat of contagion and wholesale breakdown is on a scale of 1929 is real.” The moves came as global markets were on tenterhooks following a near-collapse of Wall Street giant Bear Stearns that highlighted a gridlocked financial system.

The US central bank announced it was cutting by a quarter-point to 3.25 percent its primary credit rate, which is the rate offered at the Fed’s discount window for loans to institutions “in sound condition.”

The cut, announced as Asian financial markets were set to open, came after a week of market turmoil and was part of “two initiatives designed to bolster market liquidity and promote orderly market functioning,” a Fed statement said.

The Fed said it would make liquidity available starting Monday to “primary dealers,” which include brokerages that are not currently eligible for direct loans from the central bank. The Fed board also extended the maximum time of discount window l