WASHINGTON — The U.S. Federal Reserve's balance sheet fell for a third-straight week as banks reduced their use of several Fed lending and credit programs.
Meanwhile, deposits held at the Fed by banks dropped last week by almost $20 billion to $808.30 billion, according to Thursday's weekly report from the Fed.
The Fed's balance sheet stood at $2.04 trillion Wednesday, down from $2.06 trillion the previous week.
Still, economists think that figure should climb again once programs to support the agency and mortgage-backed securities markets are fully implemented. The balance sheet was less than $1 trillion as recently as mid-September.
The weekly balance sheet and lending data are usually released at 4:30 p.m. EST, but were delayed.
Meanwhile, borrowing through the Fed's discount window by commercial banks, known as primary credit, fell almost $4 billion $62.90 billion last week. Average daily borrowing was $61.62 billion, also down from last week.
Lending through the Fed's primary dealer credit facility, created in March for investment banks following the collapse of Bear Stearns, was largely unchanged at $33.29 billion on Wednesday.
When other loans and liquidity programs are added, including a $38.33 billion loan outstanding to American International Group Inc., Fed lending totaled about $149.32 billion on Wednesday, down almost $6 billion from the previous week.
Once one of the more secondary of Fed reports, the weekly balance-sheet data have taken on heightened importance. With official interest rates near zero, credit programs have largely replaced the federal-funds rate as the central bank's main tool.
As of Wednesday, the Fed provided $14.78 billion in credit through the Federal Reserve Bank of Boston for an asset-backed commercial paper/money-market mutual-fund liquidity facility. That was down slightly from the previous week.
However, net portfolio holdings in connection with the Fed's commercial-paper funding program jumped more than $15 billion on the week and stood at $350.52 billion on Wednesday. Purchases under the program started Oct. 27, allowing companies to sell their three-month commercial paper to the Fed.
The U.S. commercial-paper market fell for a second-straight time last week, by $30.3 billion, which along with the increased Fed holdings suggest significant strains remain in that market.
The Fed said it held $2.54 trillion in Treasury securities and federal agency debt on behalf of foreign central banks as of Wednesday, up slightly from the previous week.
Earlier Thursday, the Fed said it bought $19.01 billion in agency-backed mortgage-backed securities during the week ended Wednesday, after buying almost $34 billion over the previous two weeks.
Those are the early installments of at least $500 billion in purchases of those types of securities the Fed has pledged to make by the end of the second quarter.
The Fed's balance sheet, which only includes purchases that have actually settled, reported MBS holdings of $5.99 billion as of Wednesday, up slightly on the week.
