(Updated with details of the Fed's agency-backed MBS purchase program in the sixth paragraph, an outstanding loan to AIG in the ninth paragraph, and custody holdings in the 15th paragraph.)
By Brian Blackstone Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The U.S. Federal Reserve's balance sheet retreated a bit last week after steady increases in recent months reflecting the myriad credit programs launched by the Fed in recent months to spur lending in credit markets.
Still, once a new Fed initiative to purchase mortgage-backed securities is fully reflected in the data, the size of the balance sheet should expand further.
Meanwhile, deposits held at the Fed by banks slid last week by around $14 billion to $846.1 billion, according to Thursday's weekly report from the Fed.
The Fed's balance sheet stood at $2.14 trillion Wednesday, down from close to $2.3 trillion the previous week.
However, economists think that figure will eventually climb toward $3 trillion when programs to support the agency and mortgage-backed securities markets are fully implemented. The balance sheet was under $900 billion at the end of 2007 and was still less than $1 trillion as recently as mid-September.
Earlier Thursday, the Fed said it has bought $10.2 billion in agency-backed mortgage-backed securities, the first installment of at least $500 billion in purchases of those types of securities the Fed has pledged to make.
Meanwhile, borrowing through the Fed's discount window by commercial banks, known as primary credit, fell around $10 billion from last week and stood at $83.68 billion Wednesday. Average daily borrowing was little changed at $87.94 billion.
Lending through the Fed's primary dealer credit facility, created in March for investment banks following the collapse of Bear Stearns, fell to $34.33 billion on Wednesday from $37.4 billion the previous week.
When other loans and liquidity programs are added, including a $39.12 billion loan outstanding to American International Group Inc. (AIG), Fed lending totaled about $178.28 billion on Wednesday, down about $15 billion from 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 federal-funds rate as the central bank's main tool.
Last month, the Fed slashed the fed-funds target to a record-low range near zero. In a statement, officials signaled that their focus will be on the Fed's balance sheet to stimulate the economy.
As of Wednesday, the Fed provided $21.14 billion in credit through the Federal Reserve Bank of Boston for an asset-backed commercial paper/money-market mutual-fund liquidity facility. That was down more than $2 billion from the previous week.
There was little change in net portfolio holdings in connection with the Fed's commercial-paper funding program, which stood at $334.1 billion on Wednesday. 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 rose sharply last week, by $83.1 billion, and the fact that Fed purchases were largely steady suggests private-sector activity may be returning to that sector.
The Fed said it held $2.52 trillion in Treasury securities and federal agency debt on behalf of foreign central banks as of Wednesday, largely unchanged from the previous week.
-By Brian Blackstone, Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com
(Meena Thiruvengadam contributed to this report.)
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Publié le 08 janvier 2009 Copyright © 2009 Dowjones