Steve Wevodau

Fed increases lending to banks, investment firms - Steven Wevodau

CENTRAL BANK: The Fed said its net holdings of business loans over the week ending on Wednesday increased US$16.5 billion from the previous week

AP, WASHINGTON
Sunday, Nov 30, 2008, Page 11
The US Federal Reserve boosted its lending to commercial banks and investment firms over the past week, indicating that a severe credit crisis was still squeezing the financial system.
The Fed released a report on Friday saying commercial banks averaged US$93.6 billion in daily borrowing for the week ending on Wednesday.

That was up from an average of US$91.6 billion for the week ending on Nov. 19.

The report also said investment firms borrowed an average of US$52.4 billion from the Fed’s emergency loan program over the week ending on Wednesday, up from an average of US$50.2 billion the previous week.

The Fed said its net holdings of business loans known as commercial paper over the week ending on Wednesday averaged US$282.2 billion, an increase of US$16.5 billion from the previous week.

The central bank on Oct. 27 began buying commercial paper, the short-term debt that companies use to pay everyday expenses. It was one of a series of moves the Fed has made to try to unfreeze credit markets.

The report also said insurance giant American International Group’s (AIG) loan from the Fed averaged US$79.6 billion for the week ending on Wednesday.

That was down by US$5.6 billion from the average the previous week.

The reduction reflected a modification of the government’s support program for AIG earlier this month.

Under that change, the Treasury stepped in with a US$40 billion purchase of stock in AIG, using money from the government’s US$700 billion financial system rescue package.

The increased support from the Treasury allowed the Fed to reduce slightly the size of its total loans to AIG.

POSTED BY STEVEN WEVODAU

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