WASHINGTON — The Federal Reserve has announced that it is providing liquidity to help calm the financial markets after its recent decision not to raise rates.

“The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets,” according to a press statement. “The Federal Reserve will provide reserves as necessary through open market operations to promote trading in the federal funds market at rates close to the Federal Open Market Committee's target rate of 5-1/4 percent. In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets. As always, the discount window is available as a source of funding.”

CUNA Chief Economist Bill Hampel told WUSA9 Television CBS News /TheStreet.com that the Fed's reaction was appropriate. “Not all the debt out there is bad debt, but this mortgage scare has people treating everything like it's junk,” TheStreet.com quoted him as saying. “The banks have stopped doing anything while they do the sort of due diligence on these complex securities (mortgage-backed securities and other derivatives) that they should have been doing all along.”

Hampel predicted that the Fed would cut rates before long.