国际英语新闻：U.S. Fed moves aim at stabilizing financial market

The U.S. Federal Reserve's announcement Sunday to lower its emergency lending rate was the latest in a series of moves aimed at stabilizing the financial market, analysts said.

    To boost liquidity, the central bank approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent in a rare weekend move. Also on Sunday, the Fed, the Treasury Department and other government agencies gave the green-light for JP Morgan Chase to acquire Bear Sterns, which was on the brink of collapse. Since the outbreak of the subprime crisis last year, the Fed has come up with many measures to stabilize the financial market, including cutting fund interest rates and discount rates, capital infusion into the financial market, and easing restrictions on collaterals.

    And then there was the "discount window" lending facility for primary dealers, the first time the Fed to do so since the 1929 Great Depression. Traditionally, the Fed's emergency lending "discount window" only opens to commercial banks in need of short-term cash.

    The Fed's decision last Friday to provide emergency funds through JP Morgan Chase to Bear Stearns, the fifth largest investment bank in the country, to help Bear tide over its liquidity crisis, was also the first time since 1929 for the central bank to provide emergency capital to a non-commercial bank.

    "The fundamental objective of these moves by the Fed is to boost confidence in the market," said Benjamin Wey, president of investment bank and consulting firm New York Global Group.

    Li Shanquan, vice president and portfolio manager of Oppenheimer Fund, said the Fed's move to save Bear Stearn was designed to forestall the likely gigantic shock in the financial market if Bear went under when its liquidity dried up.

    "If the U.S. government didn't offer a helping hand, the turmoil on the financial market would further deteriorate," Li said.

    U.S. Treasury Secretary Henry Paulson said Sunday that the Fed's rescue of Bear Stearns would prevent other financial firms and even the whole U.S. financial system from suffering even greater harm.

    The government will take various necessary measures to ensure the stability of the financial market, Paulson said.

    The latest Fed moves, however, apparently failed to assuage worries in the market. By noon Monday, the Dow Jones Industrial Average shed more than 120 points, after going down nearly 200 points in early trading. Key indexes fell by more than 3 percent in Asia's Hong Kong and Tokyo bourses.

    Some analysts say the urgency of the Fed moves strengthened market worries on a deepening of credit crunch brought by the sub-prime crisis. The central bank was scheduled to have a regular meeting on Tuesday, but decided to announce the emergency steps two days before the session.

    On the other hand, the Fed's approval of JP Morgan Chase's buyout of Bear Stearns also prompted market speculation on the financial health of other financial institutions.

    JPMorgan acquired Bear Stearns for 2 dollars a share, or 236 million dollars in total.

    Shares of Bear Stearns, which stood at 150 dollars one year ago but dropped to 30 dollars last Friday, sank to less than 3 dollars in early trading on Monday.

    The Fed's emergency cut in discount rate also heightened market expectations of even bolder measures by the central bank.

    Investors now believe the Fed will cut interests by 1 percentage point on Tuesday, instead of the original forecast of 0.5 to 0.75 percentile.

    As the sub-prime crisis drags the financial market into deeper troubles, the U.S. government faces even graver challenges in stabilizing the financial market.

    "The U.S. government moves will help stabilize the capital market, but recovering confidence in the market needs time," said Li of Oppenheimer. "Volatility will be inevitable in the short run."