The Fed said in a statement that it would begin to buy large amounts of short-term debt in an effort to stimulate the credit markets, which have all but dried up.

Under the program, the Fed said that it would buy the unsecured short-term debt that companies rely on to finance their day-to-day activities. “This facility should encourage investors to once again engage in term lending in the commercial paper market,” the Fed said Tuesday in a statement. “An improved commercial paper market will enhance the ability of financial intermediaries to accommodate the credit needs of businesses and households.”

While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has stalled. The Commercial Paper Funding Facility, “will complement the Federal Reserve’s existing credit facilities to help provide liquidity to term funding markets,” the Fed statement said.

The Fed said it was creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies. It hopes to have the program running soon.

Also on Tuesday, European Union finance ministers gathered in Luxembourg to seek common ground to buttress the continent’s banking system in the face of the financial crisis. Despite proposals from France and Italy, the European Union has eschewed any common fiscal approach to the crisis, mainly because Germany refuses to be drawn into a scheme for fear of being burdened with the costs of rescuing non-German banks.

The finance ministers more than doubled the minimum level of guarantees for bank deposits in member countries, to 50,000 euros ($68,000), on Tuesday as they battled to shield the Continent’s banks from turmoil and build a measure of confidence in its battered financial system.

To read this complete Fred Harteis News Article visit our news partner at:

http://www.nytimes.com/2008/10/08/business/08fed.html?_r=1&partner=rssnyt&emc=rss&oref=slogin

Source; NyTimes.com

About Fred Harteis: Fred Harteis leads Harteis International.   Fred Harteis has a background in agriculture and has created many successful business ventures.