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Fed To Provide Up To $540 Billion To Aid Money Funds

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Oct. 21 (Bloomberg) -- The Federal Reserve will provide up to $540 billion in loans to help relieve pressure on money-market mutual funds beset by redemptions.

``Short-term debt markets have been under considerable strain in recent weeks'' as it got tougher for funds to meet withdrawal requests, the Fed said today in a statement in Washington. A Fed official said that about $500 billion has flowed since August out of prime money-market funds, which with other money-market mutual funds control $3.45 trillion.

The initiative is the third government effort to aid the funds, which usually provide a key source of financing for banks and companies. The exodus of investors, sparked by losses following the bankruptcy of Lehman Brothers Holdings Inc., contributed to the freezing of credit that threatens to tip the economy into a prolonged recession.

Read the whole story at Bloomberg