Banks borrowing less in emergency loans

By Martin Crutsinger

Published: August 22, 2008

WASHINGTON — Banks borrowed a bit less over the past week from the Federal Reserve's emergency lending program, while Wall Street firms passed for a third straight week.

The Fed reported Thursday that commercial banks averaged $17.51 billion in daily borrowing over the past week. That compared with a daily average of $17.70 billion in the previous week.

Investment houses for a third week did not take out any loans, a possible sign that pressures on them for short-term credit may be easing.

The Fed granted investment houses the privilege of getting direct loans from its emergency loan program in March.

At the time, Fed Chairman Ben Bernanke and his colleagues were scrambling to deal with serious turbulence in financial markets where investors were worried about billions of dollars in losses from mortgage loans going sour.

The action followed a run on Bear Stearns that pushed what was the country's fifth largest investment bank to the brink of collapse. Bear Stearns was eventually taken over by JPMorgan Chase & Co. in a deal in which the Fed provided significant financial backing.

Originally, the borrowing privileges of investment banks were scheduled to end in mid-September, but the Fed recently extended those privileges into 2009 as the central bank deals with the most severe credit crisis to hit the country in decades.

For the week ending Aug. 20, the $17.51 billion in average daily borrowings by commercial banks represented a decline of $186 million from the average for the week ending Aug. 13.

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