By JEANNINE AVERSA, AP Economics Writer WASHINGTON (AP) - The Federal Reserve announced a series of new steps Sunday to help provide relief to a spreading credit crisis that threatens to plunge the economy into recession.
The central bank approved a cut to its lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created another lending facility for big investment banks to secure short-term loans.
The steps are "designed to bolster market liquidity and promote orderly market functioning," the Fed said in a statement. "Liquid well-functioning markets are essential for the promotion of economic growth."
The new lending facility will be available to financial institutions on Monday.
It will be in place for at least six months and "may be extended as conditions warrant," the Fed said. The interest rate will be 3.25 percent and a range of collateral will be accepted to back the loans.
The Fed also approved the financing arrangement announced Sunday by JPMorgan Chase & Co. and the Bear Stearns Cos.