Fed considers extending lending programs

July 8, 2008 at 12:40 PM

ARLINGTON, Va., July 8 (UPI) -- U.S. Federal Reserve Bank Chairman Ben Bernanke said Tuesday the Fed may extend two temporary lending programs for investment banks.

Speaking at a the Federal Deposit Insurance Corporation's Forum in Arlington, Va., Bernanke said the "short-term funding markets … have improved since March, but "remain strained."

The bank is considering extending the Primary Dealer Credit Facility and the Term Securities Lending Facility, established after the collapse of investment bank Bear Stearns in March.

The programs were initially intended to last six months, but the bank would consider extending them "should the current unusual and exigent circumstances continue," Bernanke said.

Under the PDCF, program, the Fed makes "fully collateralized loans to the remaining four major investment banks plus other broker-dealers, called primary dealers," Bernanke said.

Both programs "assured the secured creditors of primary dealers that those firms had sufficient access to liquidity, reducing the danger of runs like the one experienced by Bear Stearns," Bernanke said.

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