Britannia Radio

Treasury to provide cash to Fed market liquidity operations

By Greg Robb

WASHINGTON (MarketWatch) -- The Treasury Department announced Wednesday that it would provide cash to the Federal Reserve to fund the central bank's operations to provide liquidity to financial markets. In a statement, Treasury said that it would raise the cash in a program of Treasury bill auctions, known as a temporary Supplementary Financing Program. The auctions would be kept apart from Treasury's current borrowing program. Agency officials gave no details of the timing, size and maturity of any bills to be auctioned. The cash will help the Fed better manage its balance sheet, which has been shrinking. The Fed has been accepting lesser quality collateral from cash-strapped financial firms in the wake of the crisis. Immediately after this announcement, Treasury said it would auction $40 billion of 35-day cash management bills to fund the SFP

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