By CHRISTOPHER S. RUGABER
Associated Press

WASHINGTON (AP) - The Federal Reserve said Monday it is making more financial institutions eligible for a program to drain some of the unprecedented liquidity it added to markets during the credit crisis.

The move is intended to make the program, under which the Federal Reserve Bank of New York temporarily sells some of its securities, more effective.

The New York Fed said Monday that domestic money market mutual funds with net assets of $20 billion are eligible for the transactions, known as "reverse repurchase agreements." That's when the Fed sells securities from its portfolio with an agreement to buy them back later.

The Fed launched dozens of programs to add liquidity to credit markets during the peak of the credit crisis in late 2008 after the market came to a standstill.

The New York Fed said its announcement "is a matter of prudent advance planning" and is unrelated to the timing of the reverse repurchases, or "repos" Any decision on when to launch the repurchase program will be made by the Fed's policymaking committee.

The Fed first said in October that it would use the transactions to drain cash from the financial system. The cash that the banks and other entities use to buy Treasury bonds and other securities from the Fed is held by the central bank.

The Federal Reserve's balance sheet has more than doubled to $2 trillion since the onset of the financial crisis. The central bank has used an array of new programs to spur lending, stabilize banks and revive the economy. The central bank has also cut the short-term interest rate it controls to a record low of near zero.

The challenge for the Fed is to withdraw the stimulus it has pumped into the system and raise rates before its efforts to jump-start the economy spur inflation. At the same time, if it withdraws its support too quickly, it could undermine the nascent recovery.