Federal Reserve Chairman Ben Bernanke today said the U.S. central bank is prepared to increase the amount it lends to banks at auctions in a bid to relieve market conditions that remain far from normal.
To date, our liquidity measures appear to have contributed to some improvement in financing markets but, at this stage, conditions in financial markets are still far from normal, Mr. Bernanke said in prepared remarks at the Atlanta Feds financial markets conference in Sea Island, Ga.
We stand ready to increase the size of the auctions further if warranted by financial developments, Mr. Bernanke said, citing still historically high spreads for many debt markets as a sign of stress.
The Fed last year launched the Term-Auction Facility, a new lending system that allows banks to borrow funds at auctions every two weeks. The size of the Feds auctions started at $20 billion but was increased this month to $75 billion, due to demand from banks.