Total borrowing over the Fed's emergency lending window is around $105 bln per day

Commercial banks borrowed a record of $105.8 billion a day, on average, from the Federal Reserve's emergency lending window over the past week, according to Fed data released Thursday. Suffering from the ongoing credit crunch, banks turned to the Federal Reserve for funds, blowing through the previous borrowing record of $99.7 billion, set last week, the central bank reported.

Investment banks, meanwhile, borrowed $111 billion a day, on average, down from $131 billion a week ago.

Troubled insurer American International Group drew down another $8 billion over the past week, bringing its total borrowing to $90.3 billion. This is nearly three-quarters of the $122.8 billion loan the federal government is providing AIG. About $18 billion is being drawn from a $37.8 billion lending facility that the New York Fed provided to the world's largest insurer two weeks ago. The facility was designed to provide funding for AIG's businesses after its securities lending division ran into trouble. The company has also borrowed $72 billion of the original bridge loan of $85 billion it received from the federal government in mid-September to prevent its collapse.

On Thursday, the Fed also reduced the value of the $30 billion portfolio of mortgage securities acquired to facilitate JPMorgan's March acquisition of Bear Stearns to $26.8 billion, down from $29.5 billion the week before. The central bank revalues the portfolio every quarter. However, it plans to hold the securities for 10 years so the loss is largely just on paper.

Analysts at Bear Stearns had expected a $2 billion to $6 billion drop in the portfolio. Half the portfolio is made up of securities backed by commercial real estate loans. The other half is a mix of securities backed by prime residential mortgages, made to borrowers with good credit, and by Alt-A residential mortgages, given to those who provided little or no documentation of income and assets.

Related Posts :

1. The worldwide is waiting for The Fed's benchmark rate decision policy
2. US mulls buying stakes In US Insurers
3. Fed loses 9% in Bear Stearns Portfolio
4. AIG Exceeds Loan

Sources :

CNN Money: Banks in record Fed borrowing, October 23, 2008

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