Fed extends 3 emergency loan programs

New date aligns with other efforts

WASHINGTON - The Federal Reserve extended the term of three emergency loan programs to April 30 from Jan. 30, aligning their expiration dates with other central bank efforts to mitigate the credit crisis.

The Primary Dealer Credit Facility and Term Securities Lending Facility, created in March, and the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, begun in September, were lengthened in light of continuing strains in financial markets, the Fed said yesterday in a statement in Washington.

The three loan facilities, part of the central bank's efforts to cushion financial markets from the worst crisis in seven decades, had about $304 billion in loans outstanding as of last week. The Fed already authorized other programs through April for supporting the commercial paper market and money-market funds and for swapping dollars with 14 central banks.

"There have been very few signs of healing in credit markets," said former Fed Governor Lyle Gramley, now a senior economic adviser at Stanford Group Co. in Washington. "Therefore the Fed can continue to invoke 'unusual and exigent circumstances' " as a rationale for the loan programs, he said.

The primary dealer facility provides loans to Wall Street bond dealers. The Fed added programs in September special to three dealers: Goldman Sachs Group Inc., Morgan Stanley, and Merrill Lynch & Co. Lending totaled $57.9 billion as of Nov. 26.

The Fed created Primary Dealer at the time of the near-collapse of Bear Stearns Cos. in March. The rate on the loans is 1.25 percent, the same as the discount rate for commercial banks.

The Term Securities Lending Facility auctions loans of Treasury securities to the same bond dealers in exchange for collateral such as mortgage-backed securities. Lending totaled $193.2 billion as of Nov. 26.

Under the money fund commercial paper facility, the Fed offered loans to banks to buy asset-backed commercial paper from the mutual funds, which were beset by redemptions in September. Loans under that program fell to $53.3 billion on Nov. 26 from $61.9 billion earlier and a peak of $152.1 billion on Oct. 1.

"Judging the effectiveness of the Federal Reserve's liquidity programs is difficult," Fed chairman Ben S. Bernanke said in a speech Monday. "Obviously, they have not yet returned private credit markets to normal functioning. But I am confident that market functioning would have been more seriously impaired in the absence of our actions."

Bernanke said that "once financial conditions become more normal, the extraordinary provision of liquidity by the Federal Reserve will no longer be needed."