Posted by Yen Ho
Written by Neil Irwin
The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion.
The decision by the Fed to buy government bonds and mortgage-related securities is designed to lower borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. The central bank, effectively, will print more money to pay for the purchases.
Combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies.
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