Fed makes a move to break credit logjam

WASHINGTON — The Federal Reserve on Tuesday introduced a new program to finance the purchases of assets from money-market mutual funds as the government continued to search for ways to battle a severe credit crisis.

"The short-term debt markets have been under considerable strain in recent weeks as money-market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests," the Fed said in an announcement of its new effort.

JPMorgan Chase & Co. was chosen to run five special funds that will buy certificates of deposit, bank notes and commercial paper from money-market mutual funds. The Fed will lend up to $540 billion to the five funds to support the effort.

Fed officials said that about $500 billion had flowed out of prime money-market funds since August as investors began to worry about their ability to redeem their investments. On Sept. 18, the Treasury Department announced it was tapping a $50 billion Treasury fund to provide guarantees for the assets in the funds. The new Fed initiative is designed to bolster the funds further.

Meanwhile, the Treasury Department said Tuesday that it had selected two major accounting firms to help manage the government's $700 billion rescue program for the financial system.

The department selected Pricewaterhouse Coopers to be an auditor for the program that will purchase troubled assets from financial institutions, and Ernst & Young was chose to provide general accounting support.

Those announcements came as the House Financial Services Committee held a hearing Tuesday in which experts discussed what needs to be done to improve the government's regulatory structure. The aim is to find a way to better manage the financial system to prevent another financial crisis.

Democrats in Congress were also pushing ahead with efforts to assemble a second economic stimulus program. That effort got a timely endorsement on Monday from Federal Reserve Chairman Ben Bernanke.