Fed Pushes Harder, but Sentiment Isn't Shifting

American Banker (03/10/08); Sloan, Steven
On March 7, the Federal Reserve announced it would raise two term-loan auctions slated for this month to $50 billion each in an effort to add liquidity to the banking system, with the first auction slated for March 10. Additionally, the central bank aims to assure that it will continue to provide liquidity by extending the auctions for another six months, boosting the size of the auctions as necessary and beginning term repurchase transactions. However, observers say it remains unlikely that the efforts will prompt banks to lend, especially because the credit crunch has worsened over the last seven months. According to Promontory Interfinancial Network Vice Chairman Alan Blinder, "The problem is not so much liquidity as the unwillingness of anyone to take any risk. . . . The deeper problems with our financial system are not going to be fixed by injecting more and more liquidity into the markets."