Fed actively considering liquidity measures: source

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The Federal Reserve is actively considering all of the tools it has available to address liquidity issues, according to a Fed source, while newspapers reported action could come as early as Wednesday.

The Financial Times web site said an overhaul was likely to take the shape of a new liquidity facility that will auction loans to banks.

This would, it said, allow the Fed to provide liquidity directly to a large number of financial institutions against a wide range of collateral without the stigma of its existing discount window loans.

The Wall Street Journal web site said markets were widely discussing steps the Fed could take, including another cut in the discount rate, longer-term loans to money-market dealers, and easier collateralized loans from the Fed. It said the Fed could take action within days.

The idea of new Fed action follows Tuesday's 25 basis point cut in both the federal fund rate and the discount rate.

The moves disappointed investors who wanted tougher action and sent Wall Street stocks tumbling.

A Fed source told Reuters late on Tuesday that officials at the U.S. central bank were not unaware that funding pressures had become worse and that tools to address liquidity issues remained under active consideration.

(Reporting by Mark Felsenthal and Jeremy Gaunt, editing by Mike Peacock)

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