European, Japanese Central Banks Pump in Billions

Major European central banks pumped yet more billions in short-term credit into the financial system recently in an effort to shore up confidence in the aftermath of Lehman Brothers Holdings Inc.'s bankruptcy and the sale of Merrill Lynch to Bank of America Corp. The European Central Bank, which oversees monetary policy in the 15 countries that use the euro, launched its 2nd one-day refinancing operation in as many days, offering 70B euros ($99.4 billion) at a 4.25% bid rate. The bank said on its Web site that it had 56 bidders asking for a total of 102.48 billion euros ($144.53 billion), indicating that lending is still very tight. Recently, the ECB added 30 billion euros ($42.5 billion) to money markets, though banks oversubscribed the offer by 3x at 90.3 billion euros ($127.8B). The ECB President said recently that the financial turmoil is an ongoing process and they have to remain extraordinarily alert. In London, the Bank of England provided another 20 billion pounds ($35.6 billion) to markets, four times the amount it pumped recently. The bank said it received bids of 58.1B pounds ($103.44B) on the 2-day tender, another sign that banks are hungry for cash. The BoE said the move was made "in response to conditions in the short-term money markets this morning." In Zurich, the Swiss National Bank also offered extra money in a 1-day operation after it provided some 8 billion francs ($7.2 B) at a 1.9% rate the day before. Japan's central bank also joined in to ensure liquidity recently, injecting 2.5 trillion yen ($24B) into money markets, and issued a statement vowing to take measures to maintain stability in Japan's financial markets.