October 7, 2008

BIRMINGHAM, Ala. - The Federal Reserve announced plans Tuesday to fund short-term business loans in an effort to free up the flow of U.S. credit, according to USA Today.  Amid the ongoing credit crisis, short-term business loans used by companies to meet payroll responsibilities among other costs have dried up with banks fearing loans will not be paid back, but now the Federal Reserve plans to start issuing such loans in an effort to prop-up struggling businesses and consumers.

"The root of the current crisis is a lack of liquidity for businesses, because banks are holding on to their cash rather than lending it out," said Andreas Rauterkus, associate professor of Finance at UAB's School of Business.  "This move by the Fed should free up cash that will be loaned out, providing needed money to small businesses and anyone else that needs a loan."