[Merlyn]

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Fed Boosts Cash Auctions to $900 Billion, May Do More (Update4)

By Scott Lanman and Craig Torres

Oct. 6 (Bloomberg) -- The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

``The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,'' the central bank said in a statement released in Washington today. The Fed and Treasury are ``consulting with market participants on ways to provide additional support for term unsecured funding markets,'' including short-term corporate financing called commercial paper, the statement said.

Today's steps follow a hoarding of cash by banks that sent the premium on the three-month London interbank offered rate over the Fed's benchmark interest rate to a record. Industrial companies are also finding it harder to raise cash after the market for commercial paper shrank to a three-year low as investors flee even borrowers with few links to mortgages.

Rest of story at: http://www.bloomberg.com/apps/news?p...fkxao&refer=us

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