The Federal Reserve will provide funds for banks

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The Federal Reserve will provide funds for banks to borrow in an attempt to forestall any cash shortages at the end of the year, its first such operation since December 2005.

The Fed's New York branch said in a statement that it plans a series of repurchase agreements, starting with an $8 billion injection on Nov. 28, extending into next year. The move follows the European Central Bank's commitment last week to make extra cash available to ``counter the re-emerging risk of volatility'' in money markets.

``The Fed is pulling out all stops to try to alleviate funding pressures in the money and financing markets as the markets lurch into year-end,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Fed officials acted after the average U.S. overnight lending rate between banks exceeded their target seven of the past eight days, suggesting a reluctance to lend amid mounting subprime mortgage losses. In most years, banks face year-end pressures as they adjust their books to show ample liquidity and at the same time meet a jump in demand for cash from consumers.

The New York Fed said it planned the steps ``in response to heightened pressures in money markets for funding through the year-end.'' Officials will ``provide sufficient reserves to resist upward pressures'' on the benchmark federal funds rate around year-end. The Nov. 28 repo will mature on Jan. 10.

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