Fed launch a new srategy to thaw credit market

--In a biggest coordinated effort of international finance forces since Sept 11, 2001, Fed joined four other central banks in a plan aimed at coaxing banks to lend more money at a time when fear seized up the credit market --Fed will lend to $80 bil through four aution-off time windows in the next couple of months. To ease bank's concern, the lending rate will below the discount rate and a wide array of collateral will be accepted. --ECB and British, Swiss, and Canadian central banks simultanneously annouced the new or expanded operations to supply their banks with more cash. Japanese and Swedes chimed in the rhetoric support. Fed also agreed to provide U.S dollars to ECB and the Swiss central banks since a lot of them used U.S dollars to finance their portfiolios related to US mortgages. --The action was aimed to resolving the worrying dilemma, that the benchmark lending rates is still high after it agressively cut interest rates. The Fed has tried to solve two major issues since Auguest. One has been to cut rates enough to spur economic growth without fueling inflation. The other was to ease credit crunch that has muffled the ecnomic benefits of those rate cuts. So far the medcine was not working and rates offered to consumer and each other was stubbornly high. --Market responded to the action positively. S&P index was up nearly 1.5% after the plan was annouced and 3-M US LIBOR rate dropped from 5.06% to 4.88%. --the new strategy resembles other facilities such as open market operations which applies only to 22 bond dealers and collateral limits only to treasury and certain high quality mortages, and discount window which carries stigma for borrowers.