Bernanke launches the money copters to Wall Street

Section:

Wall Street Banks Fight for Life

By Francesco Guerrera, Krishna Guha, and Greg Farrell
Financial Times, London
Monday, September 15, 2008

Wall Street was in turmoil on Sunday as Merrill Lynch found shelter in a $35 billion-plus takeover by Bank of America and Lehman Brothers headed towards filing for bankruptcy.

BofA's bold bid for Merrill came as the world's top banks appeared close to abandoning efforts to save Lehman and set out to build a firewall against further financial chaos with a $50 billion liquidity pool to support other vulnerable institutions.

The Federal Reserve announced a dramatic expansion of its lending operations, saying it would in future accept all assets including equities and whole loans as collateral for loans under the primary dealer credit facility.

It widened the set of assets eligible as collateral for loans of Treasuries to include all investment grade paper, and raised the size of these Treasury loans to $200 billion.

The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries.

The moves capped a weekend of high drama that could lead to one of the most radical reshapings in Wall Street's history.

Monday's market reaction will be closely watched by regulators and banking executives to gauge investor sentiment towards the credit crunch that has wreaked havoc on the financial sector for more than a year. Futures contracts last night indicated that New York shares could open sharply lower. ...

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For the full story:

http://www.ft.com/cms/s/0/f8834910-82aa-11dd-a019-000077b07658.html?ncli...

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