WASHINGTON, Aug 16: The Federal Reserve flexed its financial muscle again on Thursday, injecting $17 billion into the US banking system to ease a credit crunch triggered by fears over the ailing mortgage market.The central bank has pumped a total $88 billion into the financial markets in the past week to stop the country's banking system from gumming up.

The Fed injected the $17 billion in two separate operations consisting of an initial tranche of $5 billion rapidly followed by a much larger infusion of $12 billion.

The Fed has been forced to act as banks, mortgage lenders and other financing firms have tightened lending standards amid what some mortgage executives have called a credit crisis.

The credit crunch is making it harder for mortgage lenders and private equity firms, which often use debt to fund buyout deals, to borrow fresh cash.

A housing slump and a sharp rise in property foreclosures have forced dozens of mortgage lenders out of business in recent months.

The Fed pumped $5billion before US stock markets opened for trading and an additional $12 billion shortly after Wall Street opened on a weaker note.

The stock markets have been roiled in the past week by the problems sweeping the mortgage sector.

The central bank's latest interventions were executed by the Federal Reserve Bank of New York and its team of specialist traders acting on the behalf of the Washington-based Fed.

The Fed regularly intervenes in the banking system, but it has been forced to significantly step up its actions in the past week as credit has tightened and investors have fled risky investments.

Under this process, the central bank typically buys securities from commercial banks under an arrangement which obliges the banks to repurchase the securities back from the Fed at a later date.

The arrangement temporarily boosts the flows of cash pumping through the financial system.

—AFP