Fed lends record $431 billion as of WednesdaySubmitted by SIERRAHPBT on Fri, 10/10/2008 - 19:02
Fed lends record $431 billion as of Wednesday
By Rex Nutting, MarketWatch
Last update: 7:05 p.m. EDT Oct. 9, 2008Comments: 64WASHINGTON (MarketWatch) -- The Federal Reserve pumped a record $431 billion into financial markets as of Wednesday through its various special-lending facilities, in a desperate attempt to keep the economy alive despite broken credit markets.
The average daily balance of loans from the Fed topped $420 billion for the week ending Wednesday, also a record, the Fed reported Thursday.
Banks tapped the Fed's discount window for a record $98 billion as of Wednesday, double last week's record.
Loans to primary dealers fell to $123 billion from $147 billion a week earlier.
Loans to troubled insurance company American International Group Inc. (AIG:American International Group, Inc
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AIG 2.33, -0.06, -2.5%) rose to $70 billion from $61 billion. The Fed announced earlier this week an expansion of its credit line to AIG.
'This liquidity lock, where transactions are impeded by severe risk aversion by potential investors, compounds problems created by a traditional credit crunch.'
— Eric Rosengren, Boston Fed
Loans to money-market mutual funds fell to $139 billion from $152 billion.
In concert with other major central banks, the Fed lowered its target interest rate by half a percentage point to 1.5% on Wednesday. It also announced a new program Tuesday to buy unsecured, high-quality commercial paper, but that program is not yet operational.
The Fed is fighting to supply the flow of money that's usually delivered by the private financial system. The system has frozen up by fears that have hit even the safest corners of the money system, including interbank lending and commercial paper.
Boston Fed President Eric Rosengren drew a distinction in a speech late Thursday between a credit crunch (which has been ongoing), and what he called a liquidity lock (which is a newer development).
In a credit crunch, banks are unwilling to lend new money as they attempt to deleverage by shrinking assets to meet the required ratio of capital to assets, Rosengren said. In a liquidity lock, by contrast, even highly rated financial firms are unable to borrow needed funds for longer than a day.
"This liquidity lock, where transactions are impeded by severe risk aversion by potential investors, compounds problems created by a traditional credit crunch," Rosengren said.
Rex Nutting is Washington bureau chief of MarketWatch.
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40% drop in our stock market and not even in a recession.
Clearly, the fake numbers from the govt, are fake.....causing investors to panic.
Bears knew the fake numbers would come...
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