The Fed said it was boosting the amount of emergency reserves it supplies to United States banks to US$150 billion ($205 billion) in May, from the US$100 billion it supplied in April. The Fed took this action and several other moves to boost credit in coordination with the European Central Bank and the Swiss National Bank.

The latest moves are part of a series of actions the Fed has made since the credit crisis struck in August. The efforts are designed to increase reserves so that banks do not become hesitant about lending to consumers and businesses, which would make the current economic slowdown even more severe.

The Fed’s decision to boost the amount of loans it makes to banks every two weeks was aimed at sending a strong signal that it is prepared to supply as much in reserves as US banks need.

The Fed said it was also expanding the types of assets that investment banks can use as collateral to receive loans from the central bank. In March, the Fed used powers it got during the Great Depression to begin making loans to investment banks. Previously, the Fed only gave direct loans to commercial banks.

Source : Today – 3 May 2008

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