Banks, Wall Street firms increase borrowing from Fed in past week

WASHINGTON -- Banks and Wall Street firms ramped up borrowing from the Federal Reserve's emergency lending facility over the past week, a fresh sign of the credit stresses plaguing the country.

A Fed report released Thursday says commercial banks averaged $21.6 billion in daily borrowing over the past week. That compared with a daily average of $19.8 billion in the previous week.

For the week ending Sept. 17, Wall Street firms drew such loans averaging $20.3 billion. That step-up comes after six straight weeks where they didn't draw any loans. Their borrowing averaged as high as $38.1 billion a day over the course of a week in early April.

The report comes as Fed Chairman Ben Bernanke battles the worst financial crisis in decades. In the last few days, the American financial system has been badly shaken as bad bets on dodgy mortgage-backed securities claimed more Wall Street giants.

Scrambling to break the grip of a worsening global credit crisis, the Fed and foreign central banks stepped up action Thursday pumping as much as $180 billion in money markets overseas. At home the New York Fed acted to ease a spike in overnight lending rates by injecting $55 billion into the U.S. banking systsem.

President Bush canceled an out-of-town trip Thursday to stay in Washington and meet with his top economic advisers.

Bush held a 40-minute meeting with Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission chief Christopher Cox along with White House and Treasury Department aides.

Investment houses in March were given similar, emergency-loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation's fifth-largest investment bank to the brink of bankruptcy. The situation raised fears that other Wall Street firms might be in jeopardy.

Bear Stearns was eventually taken over by JPMorgan Chase in a deal that involved the Fed's financial backing.

The identities of commercial banks and investment houses that borrow are not released. Commercial banks and investment companies now pay 2.25% in interest for the loans.