Update 2: Forbes says big European bank nearly failed last night and was a likely reason behind actions taken today. Link
How about, "kick the can?" What is the primary goal? Well...
Fed statement: http://blogs.wsj.com/economics/2011/11/30/fed-statement-on-coordinated-central-bank-action-on-currency-swaps/
FAQ From the Fed: FAQ.
"The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.
As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013."
Read: Europe is probably worse than indicated and worse than anyone with more detailed knowledge would care to admit and, if things get worse ("if market conditions warrant"), then the program can go further and involve currencies beyond the dollar. Additionally...through 2013?
Recommended related reading: the terrific new book from Jim Rickards on geopolitics and global financial issues, "Currency Wars":
US futures, of course, are skyrocketing on the news. To offer a "Seinfeld" reference, it would appear that anything and everything is on the table to continue "Serenity now", but...like the episode, it's just masking (papering over) the real issues...
