Fed lending to commercial banks, brokerages increases

WASHINGTON - The Federal Reserve boosted its lending to commercial banks and investment firms over the past week, indicating a severe credit crisis was still squeezing the financial system.

The Fed released a report yesterday saying commercial banks averaged $93.6 billion in daily borrowing for the week ending Wednesday. That was up from an average of $91.6 billion for the week ending Nov. 19.

The report also said investment firms borrowed an average of $52.4 billion from the Fed's emergency loan program over the week ending Wednesday, up from an average of $50.2 billion the previous week.

The Fed said its net holdings of business loans known as commercial paper averaged $282.2 billion over the week ending Wednesday, an increase of $16.5 billion from the previous week.

Financial firms are borrowing from the Fed because they are having trouble raising money through normal channels as the financial system endures its worst crisis since the Great Depression.

Banks are hoarding cash rather than making loans out of fear that they won't be repaid.

The Fed and the Treasury have been flooding the financial system with money in hopes that banks can return lending operations to more normal levels.

The central bank on Oct. 27 began buying commercial paper, the short-term debt that companies use to pay everyday expenses.

It was one of a series of moves the Fed has made to try to unfreeze credit markets.