Fed starts buying government debt this week

WASHINGTON -- The Federal Reserve this week will begin buying up to $300 billion in government debt, an effort aimed at lowering interest rates to spur consumer spending and revive the economy.

The first purchase is scheduled for Wednesday, followed by one on Friday. Other operations are slated for March 30, April 1 and April 2, the Federal Reserve Bank of New York announced Tuesday.

The Fed at its meeting last week said it would buy up to $300 billion in Treasury securities over the next six months, opening a new front in its battle to end the recession. At the same time, the Fed said it would ramp up its purchases of mortgage securities from Fannie Mae and Freddie Mac to help lower mortgage rates and aid the crippled housing market.

With the Fed's key bank lending rate already near zero, the central bank has turned to other unconventional ways to heal the economy and provide relief to stressed credit and financial markets.

The Fed will concentrate its purchases of government debt on 2- and 10-year Treasury securities. The central bank doesn't plan to purchase Treasury bills.

In general, the Fed plans to conduct two to three operations a week. The central bank will buy the securities at auctions. Big government "primary" securities dealers, such as Barclays Capital, Banc of America Securities and Citigroup Global Markets are eligible to sell Treasury securities to the Fed.