CORRECTED-UPDATE 2-Fed expands liquidity operations to soothe ma

(Adds comments from Fed)

WASHINGTON (Reuters) - The U.S. Federal Reserve on Friday announced steps to help ease persistent strains in credit markets, increasing the size of some cash auctions for financial institutions and the amount of U.S. dollars it provides to the European Central Bank and Swiss National Bank.

The U.S. central bank said it was stepping up the amounts offered in its Term Auction Facility auctions, which are held every two weeks, to $75 billion from $50 billion, beginning with an auction on May 5.

It also said it was increasing an existing temporary currency swap line with the European Central Bank to $50 billion from $30 billion and increasing a swap line with the Swiss National Bank to $12 billion from $6 billion.

The swap lines, which the Fed said it was extending through Jan. 30, 2009, are aimed at sating demand for dollars in European markets.

"In view of the persistent liquidity pressures in some term funding markets, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing an expansion of their liquidity measures," the Fed said.

The Fed launched its Term Auction Facility program in December, and has repeatedly increased the amounts offered under the program to help ease the crunch in credit markets.

In addition to expanding the size of its TAF auctions, the Fed on Friday said it was widening the scope of collateral it will accept for loans under the separate Term Securities Lending Facility program to include AAA-rated asset-backed securities. Like its discount window lending operations, it already accepted U.S. Treasury and agency securities and agency mortgage-backed securities.

"The wider pool of collateral should promote improved financing conditions in a broader range of financial markets," the central bank said.