In addition to the $75 billion 28-day Term Auction Facility (TAF), the Fed will also be conducting a $25 billion 84-day TAF to address the ongoing "fragility" of the financial system. The Fed also said it would be extending its extraordinary lending to late January 2009.

"In light of continued fragile circumstances in financial markets, the Board has extended the PDCF through January 30, 2009, and the Board and the Federal Open Market Committee (FOMC) have extended the TSLF through that same date," according to a statement from the Fed on Wednesday. "These facilities would be withdrawn should the Board determine that conditions in financial markets are no longer unusual and exigent."

Starting Aug. 11, the Fed will conduct bi-weekly TAF auctions alternating between 28-day and 84-day loans. The Fed currently holds a 28-day TAF every two weeks.

Dealers will also be allowed to access up to $50 billion in treasuries at the Term Securities Lending Facility (TSLF).

The Fed also announced that it was stepping up its international co-operation with the European Central Bank and Swiss National Bank. It will increase its swap line with the ECB to $55 billion from $50 billion while the SNB's line remains at $12 billion. Both central banks will follow the Fed's TAF auction and offer U.S. dollar loans on their end.

The ECB said the move "is intended to continue the provision of USD liquidity for as long as the Governing Council considers it to be needed in view of the prevailing market conditions."

By Erik Kevin Franco and edited by Nancy Girgis