(Updates with economist comment and background information, beginning in the second paragraph.)
By Brian Blackstone Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- U.S. financial institutions in the latest week continued to extensively tap Federal Reserve facilities created to extend credit and assist commercial paper and money markets funds.
Meanwhile, deposits held at the Fed by banks jumped again last week by about $44 billion to more than $655 billion, reflecting the quantitative easing steps taken by the Fed in which cash is essentially created and used to fund new lending facilities, boosting reserve balances in the banking system.
"It's just the beginning of an upswing," once new Fed facilities are reflected in the data, said Lou Crandall, economist at Wrightson ICAP.
Meanwhile, total borrowing at the Fed's discount window, including both depository institutions and primary dealers, fell slightly to $248.75 billion Wednesday, from $259.05 billion in the prior week.
Average daily borrowing decreased to $255.57 billion from $283.18 billion. Lending through the Fed's primary credit facility, used by commercial banks, slipped to $87.81 billion Wednesday, from $91.73 billion last week.
Lending through the Fed's primary dealer credit facility, created in March for investment banks following the collapse of Bear Stearns, was little changed at $55.62 billion Wednesday compared to $57.89 billion a week earlier.
The Fed data showed the outstanding balance of a loan to insurer American International Group Inc. (AIG) was little changed at $55.95 billion. The data also included one new credit facility that's part of the government's revamped loan to American International Group Inc. Under the revised terms announced on Nov. 10, the Fed established a $30 billion facility to purchase collateralized debt obligations on which AIG has written credit default swap contracts.
According to the Fed report, net holdings under that CDO facility, called "Maiden Lane III," totaled $21.2 billion on Wednesday.
The Fed said Friday that, as of Wednesday, it had provided $49.23 billion in credit through the Boston Fed for an asset-backed commercial paper/money-market mutual fund liquidity facility. That was down about $4 billion from the previous week.
The Fed reported another increase in net portfolio holdings in connection with its commercial paper funding program, to $303.88 billion. Purchases under the program started Oct. 27, allowing companies to sell their three-month commercial paper to the Fed. Commercial paper is short-term debt used by corporations to fund their daily operations.
The U.S. commercial paper market did expand by $11.5 billion in the week ended Wednesday, though Thursday's data suggests that the central bank still plays a key role in that market.
"That's one standing facility that's still very much in demand," said Crandall.
Thursday's data also indicated that for a second straight week a new Fed facility to shore up the money-market mutual fund industry, the Money Market Investor Funding Facility, hasn't been used yet. The purpose of that facility is to extend credit to a series of limited liability companies that will purchase short-term debt from money funds.
The Fed's balance sheet, meanwhile, stood at just over $2.1 trillion on Wednesday, a slight increase from the previous week. Once recently announced programs to support the agency, mortgage-backed securities and consumer credit markets are included, that figure should climb toward $3 trillion.
-By Brian Blackstone, Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com
(Jeff Bater contributed to this article.)
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(END) Dow Jones Newswires
December 04, 2008 17:57 ET (22:57 GMT)

Publié le 04 Décembre 2008 Copyright © 2008 Dowjones