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Aiding Other Nations Weather The Financial Storm


As the international credit crisis continues to strain nations both large and small, the United States is standing by its allies and trading partners to steady the international financial system.

In another response to the economic turmoil, America's central bank, the U.S. Federal Reserve, has set up special lines of credit to its counterparts in fourteen nations to help banks and other financial institutions obtain the U.S. dollars they need to conduct business.

Foreign markets have already responded positively with lower interest rates and stabilized currencies, more proof that in the increasingly global economy it is best for nations to work together toward common goals.

The Fed's latest move came last week when it established so-called "currency swap lines" with the central banks of Mexico, Brazil, South Korea and Singapore. Because of the credit crisis, banks in these countries, despite healthy economies, are having trouble obtaining dollars at affordable prices on international currency markets.

The Federal Reserve's arrangement allows central banks in those nations to exchange, or swap, their currencies for dollars directly with the Fed without the now high-added cost of going through middlemen. The banks in turn can provide financing to their local customers to carry out their dollar business in international markets.

As intended, the Fed's action has served to calm nerves among banks, companies and investors. More such international cooperation is expected to emerge during a special White House Summit on Financial Markets and the World Economy next week.

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