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February 12, 2010 Friday
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Fed in talks with money market funds to drain liquidity
Heta Shah
The Federal Reserve is in discussions with money market mutual funds on agreements to help drain up to $1 trillion from the financial system, Bloomberg News reported.
The Federal Reserve is in discussions with money market mutual funds on agreements to help drain up to $1 trillion from the financial system, Bloomberg News reported Feb. 11, citing a source familiar with the talks.
The Fed is looking to reduce liquidity as policymakers plan to increase interest rates for the first time since June 2006.
Barclays Capital money-market strategist Joseph Abate estimated that the Fed’s 18 “primary dealers” are limited to a capacity of about $100 billion. Therefore, the central bank is looking to the money market mutual fund industry.
The Fed is also considering reverse repos agreements with Fannie Mae and Freddie Mac, according to the source.
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