(RTTNews) - In its latest effort to provide stability to the financial markets, the Federal Reserve Board announced Friday that it will be using two “enhancements” to existing programs to promote liquidity in the market.

The first initiative extends realm of non-recourse loans at the primary credit rate to U.S. depository institutions and bank holding companies. This will allow these organizations to buy commercial paper from money market mutual funds, the Fed said, helping funds that hold commercial paper to meet investor demands and boost liquidity in commercial paper and broader money markets.

The second initiative will allow the Federal Reserve to buy federal agency discount notes from primary dealers. These notes are short-term debt obligations issued by Fannie Mae (FNM), Freddie Mac (FRE), and the Federal Home Loan Banks.

The news from the Fed followed actions by other government authorities to help stem the financial crisis that has hit the markets in the past few days.

The SEC announced that it would temporarily ban short selling in financial stocks, following up on a similar rule put in place in the UK. Meanwhile, the Treasury Department said it has set up a program to guarantee the U.S. money market mutual fund industry.

Late Thursday, leading lawmakers and top administration officials met to discuss further solutions to the crisis. No details were announced at that time, but speculation remains that some entity will be formed similar to the Resolution Trust Corp. that helped ease the savings and loan crisis of the late 1980s and 1990s.

Wall Street has faced a series of emergencies over the past few weeks. Early this month, the government was forced to take over mortgage giants Fannie Mae and Freddie Mac. Early this week, investment bank Lehman Brothers was pushed into bankruptcy after it was unable to find funding.

Just a few days ago, the Federal Reserve extended an $85 billion loan to insurance firm AIG, pulling that company back from the brink of collapse.

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Posted in Categories: Economy, Releases, UK, USA.

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