WASHINGTON — Moving to stop the economy from stumbling further, the Federal Reserve said Friday that it would pump more cash into U.S banks to keep the nation's financial system from seizing up.
The surprise action came as the Fed formally signed on to tough new rules for the credit card industry announced a day earlier by other regulators. The two initiatives were the latest examples of how the Fed, under the chairmanship of Ben S. Bernanke, is asserting its willingness to take charge in disparate parts of the economy.
"The Fed was already the big dog on the block, but it's getting much, much bigger," said Andrew Harding, chief investment officer with Allegiant Asset Management in Cleveland. "Within the next couple years, you'll see the kind of regulation of banks that we only dismantled a decade ago, and it will be extended to investment banks."
The Fed said it would increase the amount of cash made available to banks through its biweekly loan auctions from the current $50 billion to $75 billion. Banks can use the money to make loans, thereby providing more credit for consumers and businesses.
Fed officials "are increasing liquidity every way they can," said Christopher Rupkey, chief financial economist with Bank of Tokyo-Mitsubishi UFJ in New York. "But it's not being lent out by the banks, which means it's not reaching the right borrowers."
The Fed's move shifted its focus from where it was only six weeks ago -- the dangers posed by collapsing financial firms -- to problems with the nation's banks, many of which are so shell-shocked by the turmoil that they are not making the loans needed to keep the financial system and the economy lubricated.
The action came as the U.S. labor market offered the first tepid signal that the overall economy may be leveling off instead of plunging still deeper into trouble.
Employment sank for a fourth straight month in April, according to the Labor Department. But the loss of 20,000 jobs was not as bad as the losses of the previous two months, and the April unemployment rate dropped a tenth of a point to 5%.
The economy had shed 81,000 jobs in March and 83,000 in February.
The April employment report was taken as good news largely because the job losses were nowhere near the 75,000 to 85,000 that forecasters had predicted.
Most of the losses occurred in the goods-making side of the economy, especially in construction and manufacturing, where private-sector jobs fell by 110,000. That loss was partially made up in the service sector, which added 90,000.
