Firms Take Billions In Fed Loans

The U.S. Federal Reserve had loans totaling $37 billion to large securities firms as of Wednesday, 28.5% more than a week earlier, as the central bank provides financing aimed at stabilizing capital markets.

Other credit extensions including loans to facilitate JPMorgan Chase & Co.'s purchase of Bear Stearns Cos. showed a zero balance as of yesterday, according to the Fed's weekly balance sheet. The report listed loans to Wall Street firms under a plan announced March 16 to alleviate a cash shortage.

The central bank's "Primary Dealer Credit Facility" allows Wall Street banks to borrow money overnight at a 2.5% interest rate, the same charged to commercial banks.

The Fed bypassed its own emergency-lending policies and used broader authority in the Federal Reserve Act to give both kinds of companies the same borrowing costs.

The central bank said the loans will be available for at least six months.

The Fed's decision to be lender of last resort to the 20 primary dealers of government debt came two days after the central bank's financing to Bear Stearns through JPMorgan.

On March 18, the Fed cut the discount rate by 0.75 percentage point to 2.5%, two days after reducing it by a quarter point. The more closely watched American benchmark rate, the federal funds rate, was cut last week to 2.25%.

From the discount window, direct lending to commercial banks rose by $469 million in the past week to a daily average of $550 million.

As of yesterday, the amount of loans outstanding totaled $579 million, the Fed reported. The Fed's holdings of U.S. Treasury securities fell by $47.9 billion in the week to $629 billion.

The Fed also reported M1 and M2 measures of American money supply.

M1 includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks. M2, the more widely followed, adds savings and private holdings in money market mutual funds. M2 money supply rose by $38.7 billion in the week ended March 17, leaving M2 growing at an annual rate of 6.4% in the past 52 weeks. M1 fell by $3.8 billion, declining at a 0.3% pace in the past year.