updated 9/17/2008 10:53:13 AM ET 2008-09-17T14:53:13

The Treasury Department will begin selling bonds for the Federal Reserve in an effort to help the central bank deal with unprecedented borrowing needs resulting from the current credit crisis.

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Treasury officials said Wednesday that the new program would be part of the normal auctions it conducts to finance the government's budget deficits, which have been soaring because of the current economic slump.

Treasury officials said that the first auction would be for a total of $40 billion and would occur later Wednesday. The auction would be for cash management bills that will mature in 35 days.

The announcement represented an unprecedented action in which Treasury will be selling debt securities such as bonds for the nation's central bank.

Treasury officials said the action did not mean that the Fed was running short of resources but simply was a way for the government to better manage its financing needs.

The announcement came one day after the Fed invoked powers it had been granted during the Great Depression to extend an $85 billion emergency loan to prop up the country's largest insurance company, American International Group Inc.

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