For anyone who still thinks the subprime mortgage fiasco is a minor blip for the financial markets, it’s time to find your parachute. Per a Federal Reserve press statement this morning:

The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets. The Federal Reserve will provide reserves as necessary through open market operations to promote trading in the federal funds market at rates close to the Federal Open Market Committee’s target rate of 5-1/4 percent. In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets. As always, the discount window is available as a source of funding.

A report by Thomson Financial noted that the Fed has provided reserves totalling $38 billion today:

The US Federal Reserve injected another 3.0 bln usd into financial markets this afternoon, bringing its total daily intervention to 38 bln usd. The Fed has now added 62 bln usd of liquidity to the markets over the last two days, its largest interventions since the days following the Sep 11, 2001, terror attacks. Jeoff Hall at Thomson IFR Markets said fed funds were last trading at 5.25 pct just before the Fed moved, ‘suggesting a decreasing need to push the rate down with a reserve injection’.

There also are rumors that the Fed may consider an inter-meeting rate cut should the liquidity infusion prove ineffective, as per Reuters:

In early afternoon, short-term rate futures, which measure market sentiment on likely rate policy, showed a 32 percent chance the Fed would lower overnight rates in August, although its next scheduled meeting is not until Sept. 18. At one point the implied prospects for an emergency August rate cut hit almost 90 percent.

Strange days, indeed.