From the WASHINGTON POST:
Worried that a mounting debt crisis in Europe could trip up the global economy, the Federal Reserve opened its vault Thursday to the central banks of other countries in an effort to head off a crippling shortage of dollars.
The main recipient of the Fed’s money is the European Central Bank, which will in turn extend dollar loans to banks in the nations that use the euro currency. Those banks do significant business in dollars, for instance making loans to customers operating around the world, and have been finding it harder to raise dollars from anxious investors…
At the heart of Europe’s financial problems are the hundreds of billions of dollars in risky government bonds held by the banks. Those bonds were issued by cash-strapped governments, like those of Greece and Portugal, and if they default, the banks could face massive losses. As concerns turn to the health of the banks themselves, investors are becoming wary of lending them money, at least at the previously low rates.…
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