Discount Window Borrowing Hits New Record

The Federal Reserve in its weekly report Thursday said overall direct commercial bank borrowings, including direct loans to depository institutions and securities firms, rose to a fresh record of $441.37 billion Wednesday from $430.87 billion in the prior week. Total average daily borrowing also averaged a new high of $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day.

Primary credit discount window borrowings hit a record as well by averaging $99.66 billion per day in the latest week, up from $75 billion per day the previous week. Primary dealers and other broker dealers’ credit borrowings were $133.87 billion as of Wednesday October 15, versus $122.94 billion on October 8.

Loans in the “other credit extensions” category, mostly including loans to insurer AIG, were $82.86 billion as of October 15, versus $70.30 billion as of October 8. Lending through the Fed’s primary dealer credit facility also increased by more than $10 billion to $133.9 billion from $122.9 billion a week ago.

The Fed’s asset-backed commercial paper money market mutual fund liquidity facility, designed to enable money market funds meet demands for spiking redemptions from investors (a JPMorgan (JPM) report estimates about $100 billion in redemption requests for funds of hedge funds in Q4’08), was $122.76 billion as of October 15, versus $139.48 billion on October 8.

The latest data from the Fed discount window shows how much the banking system depends now on the Fed in its new role as the sole lender of last resort as short-term funding, which is necessary for many co.’s to meet temporary shortages of liquidity caused by internal or external disruptions, has become at this point nearly impossible to find elsewhere.

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About Ron Haruni 1068 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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