WASHINGTON (AP) - Big Wall Street investment companies are taking advantage of the Federal Reserve's unprecedented offer to secure emergency loans, the central bank reported Thursday.
Those firms averaged $32.9 billion in daily borrowing over the past week from the new lending facility, compared with $13.4 billion the previous week. The program, which began last Monday, is part of the Fed's effort to aid the financial system.
On Wednesday alone, lending reached $37 billion.
The Fed, for the first time, agreed on March 16 to let big investment houses temporarily get emergency loans directly from the central bank. This mechanism, similar to one available for commercial banks for years, will continue for at least six months. It was the broadest use of the Fed's lending authority since the 1930s.
Last week, Goldman Sachs, Lehman Brothers and Morgan Stanley (MS) said they had begun to test the new lending mechanism. The Fed does not release the identity of the borrowers using the facility.
The Fed created a way for investment firms to have regular access to a source of short-term cash. This lending facility is seen as similar to the Fed's "discount window" for banks. Commercial banks and investment companies pay 2.5 percent in interest for overnight loans from the Fed.
Investment houses can put up a range of collateral, including investment-grade mortgage backed securities.
WASHINGTON (AP) - Big Wall Street investment companies are taking advantage of the Federal Reserve's unprecedented offer to secure emergency loans.
The central bank says those firms averaged $32.9 billion in daily borrowing over the past week from the Fed's new lending facility. The report Thursday does not identify the borrowers.
The lending program is part of the Fed's major effort to help the financial system.
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