August 23, 2007

Bank borrowing at records

Banks have stepped up their borrowing from the Federal Reserve, encouraged by central bank policymakers to help stem a credit crunch that has roiled Wall Street. The daily average borrowing for the week ending Wednesday was $1.2 billion. That was the highest since the attacks of Sept. 11, 2001. On Wednesday alone, the borrowing reached $2 billion, the most in a single day since April 12, 2006.

Besides lowering the rate on these loans, the Fed is now allowing loans of up to 30 days versus the normal one day. The Fed also is letting banks put up a range of collateral to back the loans. So far the Fed's has tailored a narrow response to the market turbulence, seeking to help financial institutions weather the stress and restore confidence on Wall Street.

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