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Economy in Brief

Borrowing at the Fed:  Some Arithmetic
by Carol Stone August 24, 2007

A further clarification on the borrowings data reported late yesterday by the Federal Reserve. There's some confusion over whether any banks borrowed earlier in the week or if it was just the four large banks who announced they were borrowing on Wednesday.

The Fed's "Factors Affecting Bank Reserves" H.4.1 release includes two measures for these factors, the daily average for the 7-day week ended each Wednesday and the amount outstanding on Wednesday at the close of business. The average amount of "Primary Credit" for the entire week ended August 22 was $1,200 million. The amount outstanding Wednesday night was $2,001 million. The Fed doesn't publish these figures for each day. We can, though, use the ones we have to address the general question, was there borrowing before Wednesday?

Take the $1,200 million average for the week. Multiply by 7 to obtain the aggregate amount of daily borrowing for the whole week; this is $8,400 million. Subtract the amount outstanding Wednesday night, $2,001 million, leaving $6,399 million. Divide this by the remaining days of the week, 6, and see that there indeed was an average $1,067 million every day before Wednesday. This is a not inconsiderable amount, given that there had been only $11 million of primary credit on average during the week before. We have no idea what days saw the most, who those borrowers might have been or even what Fed district they are in. But there was in fact noticeable borrowing prior to Wednesday and it looks to us that it was large enough that it probably came from a number of institutions.

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