WASHINGTON — The Federal Reserve Board's purchases of commercial paper increased 5.7% during the past week, to $256.9 billion on Wednesday.
Total lending through the Fed's discount window dropped 8.8% from a week earlier, to $316.1 billion on Wednesday, in part because traditional banks' borrowing fell 8.6%, to $99.2 billion.
But for the first time in six weeks, the Fed lent money to weak financial institutions. The central bank distributed $106 million in the form of secondary credit. The last time the central bank made such loans was Sept. 25, and the total was $19 million.
With the Fed and the Treasury Department launching a new bailout for the insurer American International Group Inc., lending to the company through the old facilities barely budged. It borrowed $83.6 billion of its former $123 billion loan, up from $81.2 billion a week earlier.
The Fed announced Monday that it was cutting the original loan to $60 billion while lowering the interest rate and lengthening the maturity. The central bank said it would also create two limited-liability corporations that would buy $22.5 billion of residential-mortgage-backed securities and $30 billion of collateralized debt obligations. These new facilities were not reported on the Fed's balance sheet this week.
Meanwhile, discount window lending against asset-backed commercial paper held by money market mutual funds dropped 10% during the past week, to $76.5 billion on Wednesday. Lending to investment banks was off 20.9%, to $56.7 billion.
Most of the discount window loans — $182.7 billion — will mature within 15 days. Another $63.1 billion will come due in 16 to 90 days, and $63.4 billion will be repaid within one to five years. The remaining $6.8 billion will mature in 91 days to one year.
The Fed's balance sheet continued to grow to support the demand for its liquidity programs. Total assets totaled $2.2 trillion on Wednesday, a 6.7% jump from a week earlier.
