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.
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