Cyrillic Partners

The Federal Reserve injected $8 billion into the economy Monday. The New York Times has the story:

The $8 billion — essentially a low-interest loan to the nation’s banks — will be issued Wednesday and repaid Jan. 10. The 43-day loan period is the longest in three years for this type of year-end injection. While it is not an unusual step for the Fed, the injection usually takes place later in the fourth quarter and involves a smaller amount. In 2005, the last time the Fed issued year-end funds, it issued 28-day repurchase agreements for $5 billion, starting Dec. 8.

Wall Street’s reluctance to lend can be intensified during the holiday season, as consumers demand more money for spending and banks look to close out their yearly balance sheets with a generous amount of capital and investments in safe-haven securities like Treasuries.

This year, anxiety about the ailing credit market has made banks more hesitant to provide their peer institutions with overnight loans, a crucial component of the nation’s economic bloodstream.

Some economists are interpreting this as a signal from the Fed that the economy is doing okay. We’re less optimistic…

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