The world's major central banks banded together Thursday to flood global money markets with massive amounts of U.S. dollars, in hopes of taming a major source of the tensions rocking the financial system.
The U.S. Federal Reserve said Thursday it will expand or introduce measures to shuttle dollars to major European central banks, the Bank of Canada and the Bank of Japan, so these central banks can provide financial institutions in their respective markets with short-term dollar funding. Among commercial banks' general scramble for short-term cash in recent days, tensions in dollar-denominated money markets have been particularly fierce.
The Fed boosted its U.S. dollar swap line with foreign central banks by $180 billion. The European Central Bank, which has had a swap line with the Fed in place since December, increased its line to up to $110 billion from $55 billion. The Swiss central bank swap line also got a boost to $27 billion from $12 billion before. With the expanded swap lines, the ECB and Swiss National Bank will up the amount of dollars they offer for 28 and 84 days in auctions they hold every other week.
Here's what's really going on: