The U.S. Federal Reserve announced today that it was lending US$20 billion to banks through the first of four special auctions designed to help alleviate the credit crunch on Wall Street.

The Fed announced the auction plan in conjunction with central banks in Canada and Europe last week.

The first auction was conducted on Monday.

Many U.S. banks had been wary of borrowing money from the Fed through the so-called discount window because the Fed’s discount rate of 4.75% is higher than the federal funds rate of 4.25%. The federal funds rate is what U.S. banks charge each other for overnight loans. The Fed lowered both rates last week by a quarter of a percentage point.

In addition, market observers feel that there is a stigma attached with borrowing at the discount rate because it may be a sign that banks are so desperate for short-term cash that they are willing to pay the higher interest rate for the funds.

To that end, the Fed said that the stop-out rate for the loans was 4.65%, a bit lower than the discount rate.

The Fed said that it received submissions for $61.6 billion in loans from 93 bidders, during Monday’s auction.

The winning bidders will receive their loans on Thursday.