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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (87053)8/25/2007 1:11:54 PM
From: Les HRead Replies (2) of 306849
 
New York Fed Accepts Asset-Backed Paper as Collateral (Update3)

By Craig Torres and Mark Pittman

Aug. 24 (Bloomberg) -- The Federal Reserve Bank of New York targeted investor gridlock in the asset-backed commercial paper market today, giving banks new information on how they can use such securities as collateral in exchange for central bank loans.

``In response to specific inquiries, the Federal Reserve Bank of New York has affirmed its policy to consider accepting as collateral investment quality asset-backed commercial paper'' for discount-window loans, Andrew Williams, a spokesman for the bank in New York, said in an interview.

The clarification is the latest effort by central bankers to lubricate credit markets, which have shut out some companies after a slide in the value of securities backed by subprime mortgages. The Fed a week ago cut the so-called discount rate on direct loans to banks and encouraged lenders to use the resource. The four largest U.S. banks borrowed $2 billion this week.

``It creates a fast-track avenue for tapping the discount window for some of the assets at the heart of the liquidity logjam,'' said Louis Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey. ``That would ease the strain on the commercial paper market considerably.''

The clarification today is the second move in as many days by Fed officials to enhance the effectiveness of the discount window in alleviating strains in capital markets.

bloomberg.com
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