Fed Widens Collateral, Banks Set Up $70 Billion Fund

Bloomberg (09/15/08); Torres, Craig; McCormick, Liz Capo
In an effort to help Wall Street weather Lehman Brothers Holdings Inc.'s Chapter 11 bankruptcy filing, the Federal Reserve has widened the collateral it accepts for loans to securities firms to include stocks. In addition, the Fed has boosted its program for lending Treasuries to bond dealers by $25 billion, while a group of 10 banks has formed a $70 billion fund to ensure market liquidity. Saumil Parikh, who helps oversee $688 billion at Pacific Investment Management Co., notes that policymakers are aiming to prevent a "broad run on the U.S. financial system." Fed Chairman Ben Bernanke adds that the Fed remains in contact with other central banks "to monitor and share conditions in financial markets and firms around the world."