By Brian Blackstone Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The Federal Reserve's balance sheet ended 2008 at almost $2.3 trillion, a weekly Fed report showed, more than doubling over the past year as policy makers created several programs aimed at propping up strained credit markets.
Meanwhile, deposits held at the Fed by banks rose again last week by over $40 billion to $860 billion, according to Friday's report.
Those gains reflect quantitative easing steps taken by the Fed in recent months in which cash is essentially created and used to fund credit auction and lending facilities, adding reserves to the banking system.
When all the lending facilities are included, the Fed's balance sheet stood at $2.27 trillion on Wednesday. Once recently announced programs to support the agency and mortgage-backed securities markets are all up and running, that figure should climb toward $3 trillion. The balance sheet was under $900 billion at the end of 2007 and was still less than $1 trillion as recently as mid-September.
The weekly balance sheet report is normally released at 4:30 p.m. EST but was delayed Friday.
Meanwhile, borrowing through the Fed's discount window by commercial banks, known as primary credit, rose almost $10 billion from last week and stood at $93.77 billion Wednesday. Average daily borrowing rose slightly to $86.55 billion from $86.26 billion.
Lending through the Fed's primary dealer credit facility, created in March for investment banks following the collapse of Bear Stearns, fell to $37.4 billion on Wednesday from $38.19 billion the previous week.
Once one of the more secondary of Fed reports, the weekly balance sheet data have taken on heightened importance as Fed policy enters a new phase where credit programs replace the fed funds rate as the central bank's main tool.
Last month, the Fed slashed the fed funds target to a record-low range between zero and 0.25%. In a statement, officials said their focus "will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level."
The Fed in its report said the outstanding balance of a loan to troubled insurer American International Group (AIG) fell slightly to $38.91 billion Wednesday.
Additionally, the Fed said as of Wednesday it was holding residential mortgage-backed securities with a fair value of $20.11 billion purchased from AIG subsidiaries. The Fed also said it was holding another $26.79 billion in collateralized debt obligations for which AIG had written credit default swap contracts.
Those facilities are known as Maiden Lane II and Maiden Lane III.
As of Wednesday, the Fed provided $23.77 billion in credit through the Federal Reserve Bank of Boston for an asset-backed commercial paper/money-market mutual fund liquidity facility. That was roughly unchanged from the previous week.
But the Fed reported an increase in net portfolio holdings in connection with its commercial paper funding program, by about $2.5 billion to $334.1 billion. Purchases under the program started Oct. 27, allowing companies to sell their three-month commercial paper to the Fed.
The U.S. commercial paper market has declined for two-straight weeks following nine-straight increases, suggesting that strains remain in that sector.
-By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=prcW14SB%2FMsESC6dUfUDPA%3D%3D. You can use this link on the day this article is published and the following day.

Publié le 02 janvier 2009 Copyright © 2009 Dowjones