Tags: US | Fed | Emergency | Lending

Banks Borrow Slightly More From Fed as Recovery Fragile

Thursday, 01 Jul 2010 02:00 PM

 

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Banks borrowed slightly more last week from the Federal Reserve's emergency lending program, but are still well below levels seen during the 2008 financial crisis.

The Fed, in a report issued Thursday, said banks averaged $162 million in borrowing for the week ended Wednesday. That's up from $151 million in the previous week.

Loans from the central bank's emergency lending program, known as the discount window, had surged to a high of $110 billion a day during the height of the financial crisis in the fall of 2008. At the time, banks turned to the Fed as a lender of last resort because their sources of credit were frozen.

With financial and economic conditions improving, the Fed has been winding down its special lending programs. Still, the central bank's balance sheet has swollen to $2.3 trillion, more than double its pre-crisis level of less than $1 trillion.

The economy, meanwhile, is fragile.

High unemployment, Europe's debt crisis and a stalled housing market are weighing on the rebound.

That means the Fed is likely to keep interest rates at record low well into next year — and possibly into 2012. If the economy shows serious signs of backsliding, the Fed could revive some crisis-era programs, such as buying mortgage securities. The Fed's $1.25 trillion mortgage program, which shut down at the end of March, drove down mortgage rates and helped boost the crippled housing market.

Federal Reserve Chairman Ben Bernanke, who met privately with President Barack Obama earlier this week, said the Fed will be taking stock of both economic development in the United States and overseas in charting out any future policy moves.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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