Fed oils financial wheels

The US Federal Reserve has released an extra $180 billion in a coordinated move to increase available funds in global financial markets.  The money is being distributed via temporary foreign currency swap arrangements (ÔÇ£swap linesÔÇØ) to five other central banksÔÇöthe Bank of England, the European Central Bank, and the central banks of Switzerland, Canada and JapanÔÇöwho will issue the funds to commercial banks in their own countries.┬á┬á The coordinated move comes after four days of almost unprecedented turmoil in the global financial industry, and is additional to funds already made available by the Fed and the individual banks themselves. ┬á┬á Firstly, US giant Lehman Brothers filed for bankruptcy protection, while compatriot Merrill Lynch lost its independence in a rescue takeover by Bank of America. The US government has bailed-out insurance giant AIG, while in the UK, banking group Halifax Bank of Scotland (HBOS) is being taken over by rival Lloyds TSB. ┬á┬á The news has helped reduce the interest rate at which banks lend to each otherÔÇöa key factor in their ability to raise funds. Well-oiled money markets where banks lend short term funds to each other to smooth out daily up and downs are vital for the proper functioning of the financial system. ┬á┬á Some analysts believe that the crisis was exacerbated when the US Treasury decided to allow Lehman Brothers to fail, increasing the reluctance of banks to make funds available to each other.┬á┬á "These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets," said the Bank of England. "The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures." ┬á┬á Meanwhile, cautious investors are looking for safer places to put their money, including government bonds and precious metals. The price of gold, regarded as a haven in troubled times, rose to $871.2 an ounce after recording its biggest one-day gain in history Wednesday. ┬á┬á Oil prices fell to $96 a barrel on fears that the deepening financial crisis will hurt the wider economy and dampen demand for crude.   ┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á