Fed announces new credit lines with foreign banks

WASHINGTON -- The Federal Reserve said Wednesday that it will supply new lines of credit to the central banks of Brazil, Mexico, South Korea and Singapore to help those countries deal with the global credit crisis.

The Fed will provide up to $30 billion to each of the central banks. It is the latest in a series of "swap" arrangements where the Fed provides dollars in exchange for reserves of the other nations' currencies.

The central bank said the new credit lines, like those already established with other countries, are designed "to help improve liquidity conditions in global financial markets" by increasing the global availability of U.S. dollars.

The Fed had previously established reciprocal swap arrangements with the central banks of Australia, Canada, Denmark, England, Japan, New Zealand, Norway, Sweden, Switzerland and the European Central Bank.

The Fed in its statement also welcomed the decision announced Wednesday by the International Monetary Fund to create a new lending facility at the IMF aimed at supplying short-term loans to countries facing liquidity problems. The IMF hopes the new facility will streamline the agency's ability to get money out quickly to countries facing a credit squeeze.

IMF officials said that a maximum of around $100 billion would be available under the program.

Countries would have to repay the money, at interest rates around 4%, within a year at the most.

The Fed said it was "supportive of the IMF's role in helping countries address and resolve their ongoing economic and financial difficulties."