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. Last Updated: 07/27/2016

Fed Joins Central Banks to Ease Crisis

WASHINGTON -- The U.S. Federal Reserve and other central banks on Tuesday teamed up to get hundreds of billions in fresh funds to cash-starved credit markets, allowing financial firms to use home mortgages as collateral.

Stocks surged and bonds fell in reaction to the moves, in a sign that the financial markets saw the plan as a viable remedy. The Dow industrials lurched 250 points higher at the start of trading, while the long-suffering dollar climbed.

In the latest effort to ease a credit contraction that has disrupted finance and rescue the world economy from a credit contraction, the Fed, Bank of Canada, Bank of England, European Central Bank and Swiss National Bank announced a series of aggressive measures to boost liquidity.

The Fed expanded its securities lending program, offering up to $200 billion of highly liquid U.S. Treasury securities to primary dealers, secured for 28 days. The amount of cash the Fed has offered to primary dealers significantly expands what mortgage securities can be used as collateral. In effect, the plan allows them to replace easy-to-sell securities for the unwanted mortgage notes.

Despite the positive market reaction, some analysts questioned whether the latest round of central bank efforts would have much staying power.