Fed lends record amount to banks
10/10/2008 12:00 AM
10/09/2008 11:37 PM
Banks borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a brisk – though slightly lower – pace, fresh proof of the credit problems gripping the country.
The Fed's report Thursday said commercial banks averaged a record $75billion in daily borrowing over the past week. The old record – a daily average of $44.5 billion – was set the previous week. Wednesday alone, $98 billion was drawn, an all-time high.
For the week ending Wednesday, investment firms drew $134 billion, down from a record $147.7 billion in the previous week. This category was widened last week to include loans to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Merrill Lynch.
The report also showed that over the last week $145.9billion in loans were made to money market mutual funds – via banks – to help the funds, which have been under pressure as skittish investors demand withdrawals.
And, the report showed the Fed has loaned $70.3 billion to insurance giant American International Group. In mid-September, the Fed said it would provide AIG a two-year, $85 billion loan. Wednesday the central bank said it would loan the company an additional $37.8 billion.
Since the Bear Stearns debacle in March, the Fed has taken radical, unprecedented steps to get lending flowing again. It 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 that the Fed's actions could put billions of taxpayers' dollars at risk.
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