Date : Wednesday, August 21, 2007
Writer : AHN / Jacob Cherian
Washington, D.C. (AHN) - After a closed-door meeting with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, Sen. Chris Dodd, (D-Conn.), said that the Fed is prepared to utilize all the tools available to address the credit crisis in the U.S. financial system.
Dodd currently the chairman of the Senate Banking Committee told reporters in Washington on Tuesday that he did not pressure Bernanke to lower the federal funds rate, reports CBS MarketWatch.
Stocks rallied after Dodd's reassurances that the Fed is ready to address the credit crisis that has been wreaking havoc on markets. By 1:13 pm Eastern, the Dow was down slightly, the NASDAQ was up 0.40 percent, while the S and P 500 gained 0.15 percent.
The Senator, who is seeking the Democratic party's nomination to the White House, said the meeting was positive, but urged the Fed to take action.
"It's time to act," Dodd said. "The ball is really in their court."
He also said banks should take advantage of the discount window rate cut that has been put in place for banks that borrow, since August 17. The central bank cut the discount rate half a percent to 5.75 percent to pump more cash to companies in need of short-term financing. However, Fed watchers speculate that it might take several days before the outcome of the slashed discount rates is known.
Dodd said, "A little more moral suasion would be helpful." Adding, "The Fed gets it and understands it," but "the Treasury doesn't," reports CBS News.
According to a Bloomberg report, interest-rate futures reveal that traders are speculating the credit crisis will eventually force Bernanke to ease monetary policy for the first time in four years.
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