WASHINGTON - BANKS borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a slightly lower - but still brisk - pace, a fresh sign of the credit stresses bedeviling the country.
The Fed's report, released on Thursday, showed commercial banks averaged a record US$105.8 billion (S$158.8 billion) in daily borrowing over the past week. That surpassed the old record - a daily average of US$99.7 billion - from the prior week. On Wednesday alone, US$107.5 billion was drawn, an all-time high.
For the week ending on Wednesday, investment firms drew US$111.3 billion. That was down from US$131 billion in the previous week.
This category was broadened last week to include any loans that were made to the United States and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch.
The Fed report also showed that over the last week US$114.2 billion worth of loans were made to money market mutual funds - via banks - to help the funds, which have been under pressure as skittish investors demand withdrawals.
The Fed announced a new effort earlier this week to help shore up mutual funds.
Squeezed banks and investment firms are borrowing from the Fed because they can't get money elsewhere. Investors have cut them off, moving their money into safer Treasury securities.
Financial institutions are hoarding whatever cash they have, rather than lend it to each other or customers.
The lockup in lending has contributed to a sharp slowing in the overall economy.
The report also showed the Fed has loaned US$90.3 billion to insurance giant American International Group.
In mid-September, the Fed said it would provide the troubled company a two-year, US$85 billion loan. And, recently the central bank said it would loan the company an additional US$37.8 billion.
Also in the weekly report, the Fed said the portfolio of certain assets it took over from Bear Stearns is now estimated to be worth US$26.80 billion as of Sept 30, down from US$29.53 billion as of Jun 30. Maiden Lane LLC holds the portfolio of assets.
The report comes as Washington policymakers battle the worst financial crisis since the stock market crash of 1929.
So far this year, 15 banks have failed, compared with three last year.
Last week, the Bush administration announced it would inject up to US$250 billion in banks - in return for partial ownership stakes. The government hopes that banks will use the capital infusions to rebuild their reserves and bolster lending to customers.
Investment houses in March were given similar, emergency-loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation's fifth-largest investment bank to the brink of bankruptcy.
The identities of commercial banks and investment houses that borrow are not released. Commercial banks and investment companies now pay 1.75 per cent in interest for the loans.
Since the Bear Stearns debacle in March, the Fed has taken a series of unprecedented steps to get lending - the economy's oxygen - flowing more freely again.
The central bank has repeatedly tapped its Depression-era authority to be a lender of last resort not only to financial institutions, but also to other types of companies.
Critics worry the Fed's actions could put billions of taxpayers' dollars at risk. -- AP
The Fed's report, released on Thursday, showed commercial banks averaged a record US$105.8 billion (S$158.8 billion) in daily borrowing over the past week. That surpassed the old record - a daily average of US$99.7 billion - from the prior week. On Wednesday alone, US$107.5 billion was drawn, an all-time high.
For the week ending on Wednesday, investment firms drew US$111.3 billion. That was down from US$131 billion in the previous week.
This category was broadened last week to include any loans that were made to the United States and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch.
The Fed report also showed that over the last week US$114.2 billion worth of loans were made to money market mutual funds - via banks - to help the funds, which have been under pressure as skittish investors demand withdrawals.
The Fed announced a new effort earlier this week to help shore up mutual funds.
Squeezed banks and investment firms are borrowing from the Fed because they can't get money elsewhere. Investors have cut them off, moving their money into safer Treasury securities.
Financial institutions are hoarding whatever cash they have, rather than lend it to each other or customers.
The lockup in lending has contributed to a sharp slowing in the overall economy.
The report also showed the Fed has loaned US$90.3 billion to insurance giant American International Group.
In mid-September, the Fed said it would provide the troubled company a two-year, US$85 billion loan. And, recently the central bank said it would loan the company an additional US$37.8 billion.
Also in the weekly report, the Fed said the portfolio of certain assets it took over from Bear Stearns is now estimated to be worth US$26.80 billion as of Sept 30, down from US$29.53 billion as of Jun 30. Maiden Lane LLC holds the portfolio of assets.
The report comes as Washington policymakers battle the worst financial crisis since the stock market crash of 1929.
So far this year, 15 banks have failed, compared with three last year.
Last week, the Bush administration announced it would inject up to US$250 billion in banks - in return for partial ownership stakes. The government hopes that banks will use the capital infusions to rebuild their reserves and bolster lending to customers.
Investment houses in March were given similar, emergency-loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation's fifth-largest investment bank to the brink of bankruptcy.
The identities of commercial banks and investment houses that borrow are not released. Commercial banks and investment companies now pay 1.75 per cent in interest for the loans.
Since the Bear Stearns debacle in March, the Fed has taken a series of unprecedented steps to get lending - the economy's oxygen - flowing more freely again.
The central bank has repeatedly tapped its Depression-era authority to be a lender of last resort not only to financial institutions, but also to other types of companies.
Critics worry the Fed's actions could put billions of taxpayers' dollars at risk. -- AP
