The European Central Bank allotted $501 billion (348 billion euros) to banks after offering unlimited funds, taking the coordinated action announced by four central banks last week a step further in a bid to alleviate the global credit crunch.
In a statement, the central bank said late Monday that it would satisfy all bids for two-week funding at or above 4.21%. The move appeared to be aimed at satisfying any funding gaps as banks close their books for the year.
Banks took 348.6 billion euros at the 4.21% rate, the ECB said on Tuesday.
The new ECB plan already has succeeded where the coordinated action didn't -- two-week lending rates in the euro area have dropped to 4.5% from 4.9%.
That's the second time in the bank's nine-year history, and the second time since August, that the ECB has offered unlimited funds. More global coverage.
The move comes as the Federal Reserve on Monday held its first auction of $20 billion in funds under the new term auction facility. Results from the auction will be published Wednesday.
The Bank of England is holding its first auction of 10 billion pounds ($20 billion) of three-month funds on Tuesday.
Mervyn King, governor of the Bank of England, told a parliamentary committee there's great confusion surrounding the central bank funding -- in net terms, for example, he said the European Central Bank has injected hardly anything into the banking system.
The growing rates that banks charge each other for loans is down to worries about where derivative losses come to rest, and over the past four weeks, growing doubts about the health of the U.S. economy, King said.
"It does hold out the prospect that there will be a self-reinforcing downturn in credit and activity," King said.
The benefit of the coordinated action was to show that central banks were working together and that they were aware of banker concerns.
He said banks are not short of cash, and indeed many were flush with it. 
Steve Goldstein is MarketWatch's London bureau chief.
INDICATIONS
INDICATIONS
LONDON (MarketWatch) -- U.S. stock futures headed higher on Tuesday after a recent stumble, with markets waiting to see how Goldman Sachs profited from its bets that the housing market would struggle.
S&P 500 futures rose 8.7 points at 1,465.60 and Nasdaq 100 futures rose 6.75 points at 2,056.25. Dow industrial futures rose 58 points.
U.S. stocks ended at two-week lows on Monday despite a fair bit of mergers-and-acquisitions action, with technology shares in particular battered on twin worries about faltering economic growth and accelerating inflation. The Dow industrials dropped 172 points, the S&P 500 fell 22 points and the tech-heavy Nasdaq Composite declined 61 points.
Tuesday's focus will turn to November housing starts, as well as central bank efforts to pump in liquidity worldwide. The European Central Bank for only the second time ever said it would offer unlimited two-week funds at a fixed rate. Result from the U.S. Federal Reserve's $20 billion auction of funds will be announced on Wednesday.
The dollar rose against the Japanese yen and against the British pound, where U.K. inflation remained unchanged in November.
Crude-oil futures rose 69 cents to $91.74 a barrel.
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