Banks borrow more from emergency Fed loan program
WASHINGTON — Banks boosted borrowing from the Federal Reserve’s emergency lending facility over the past week, but cut back on other programs intended to ease the financial crisis. The results offered a mixed picture of credit conditions.
The Fed on Thursday said banks averaged $32.7 billion in daily borrowing over the week that ended Wednesday. That was up from nearly $30 billion in the week ending Aug. 26.
The identities of the financial institutions are not released. They pay just 0.50 percent in interest for the emergency, overnight loans.
Banks, however, drew fewer longer-term loans from one of programs the Fed established to ease the financial crisis. Demand for these loans fell by nearly $9 billion from last week.
Companies also trimmed their use of another program aimed at increasing the availability of short-term financing crucial for paying salaries and supplies. The Fed’s net holding of “commercial” paper averaged $48.2 billion, a decrease of $3.9 billion from the previous week.
Separately, investors’ appetite edged down this month for a government program designed to spark lending to consumers and businesses at lower rates.
The Federal Reserve Bank of New York said investors requested $6.5 billion worth of loans. That tally is down from $6.9 billion requested in August.
Investors use the money to buy securities backed by auto and student loans, credit cards, business equipment and other things. In the first phase of the program, called the Term Asset-Backed Securities Loan Facility, or TALF, $200 billion worth of loans will be made available, but only a fraction of that has been requested since its start up in March.
The Fed’s weekly report also showed the Fed increased its purchases of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. They averaged $624.4 billion over the past week, down $107 million from the previous week. The goal of the program is to drive down more rates.
Rates on 30-year home loans dipped this week. They averaged 5.08 percent, down from 5.14 percent last week, Freddie Mac reported Thursday.
Squeezed banks borrow from the Fed when they have trouble getting the money elsewhere. At the height of the financial crisis last fall, investors cut banks off and shifted money into safer Treasury securities. Financial institutions hoarded much of their cash, rather than lending it to each other or customers. That lockup in lending contributed to the U.S. suffering its worst recession since World War II.
Critics worry that the Fed’s bailouts of Bear Stearns and American International Group last year put billions of taxpayers dollars at risk and will encourage companies to take make reckless gambles in the future on the belief the government will clean up their messes. Bear Stearns was taken over by JPMorgan Chase & Co. in a deal backed by the Fed.
The Fed report showed that credit provided to AIG averaged $38.8 billion for the week ending Wednesday, down slightly from the previous week.
The Fed’s balance sheet now stands at $2.1 trillion, more than double the level from before the financial crisis struck. The ballooning balance sheet reflects the central bank’s many unconventional lending programs to mend the financial system and pave the way for a lasting economic recovery.
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September 4th, 2009 at 2:21 am
nice info.. keep it up..
i love it!
thanks!
September 6th, 2009 at 1:40 pm
No more bailouts please. It only helps the big banks and hurts the smaller lenders and businesses.