The US Federal Reserve is making more than 20 billion euros available to central banks in Australia, Denmark, Sweden and Norway, to supply money markets with funds. It made a similar move with other central banks last week. This came as the Fed Chairman, appearing before a congressional committee, urged Congress to act swiftly on a 477 billion euro bailout plan for financial firms.
A senior Republican chimed in. Richard C. Shelby, the Senator from Alabama, said: “I do not believe however that we can solve this crisis by spending a massive amount of money on bad securities. It is time for this administration, this Congress, to do the work of devising as quickly as possible a comprehensive and workable plan for resolving the crisis before we waste 700 billion (US) dollars of taxpayers money.”
Federal Reserve chairman Ben Bernanke warned of the dire economic consequences of not putting the bailout plan into effect.
“I believe, if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way, no matter what other policies are taken,” he said.
In the meantime, the FBI is investigating four major U.S. financial institutions whose collapse helped trigger the bailout plan.
Officials said the FBI is looking into accusations of potential fraud by mortgage finance giants Fannie Mae and Freddie Mac and insurer American International Group.
Lehman Brothers Holdings is also under investigation.