Commercial banks in the U.S. borrowed in record amounts from the U.S. Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a brisk, though slightly lower pace, further evidence of the credit crisis hobbling the country.
Squeezed banks and investment firms are borrowing from the Fed because they can't get money elsewhere. The Fed's report, released Thursday, showed commercial banks averaged a record $99.7 billion US in daily borrowing over the past week.
That surpassed the old record, a daily average of $75 billion, from the prior week. On Wednesday alone, $101.9 billion was drawn, an all-time high, the report states.
For the week ending Wednesday, investment firms drew $131.1 billion. That was slightly down from $134 billion in the previous week.
The Fed report also showed that over the last week $129.6 billion worth of loans were made to help shore up money-market mutual funds. The funds have been under pressure as skittish investors demand withdrawals.
Investors flee mutual funds
Investors have cut them off, moving their money into safer Treasury securities. Financial institutions are hoarding whatever cash they have, rather than lend it to each other or customers. The lockup in lending has contributed to a sharp slowing in the overall economy, the report adds.
The report comes as Washington policymakers battle the worst financial crisis since the stock market crash of 1929. So far this year, 15 banks have failed, compared with three last year.
Earlier this week, the Bush administration announced it would inject up to $250 billion in banks, in return for partial ownership stakes. The government hopes that banks will use the capital infusions to rebuild their reserves and bolster lending to customers.