Total lending through the Federal Reserve Board's discount window continued to decline this week, falling 3.7%, to $149 billion on Wednesday.

Lending to unhealthy banks rose sharply to $17 million, from $1 million a week earlier. Traditional borrowing by strong commercial banks was down 3% during the same time period, to $66.2 billion.

The Fed said it had extended $38.6 billion by Wednesday through the discount window to support American International Group Inc. The central bank has also created a limited liability corporation through the Federal Reserve Bank of New York with loans valued at $19.2 billion, unchanged from a week earlier.

Investment bank borrowing fell 15.5%, to $27.2 billion.

Lending against ABCP held by money market mutual funds rose 6%, to $16.9 billion. The Fed has yet to make loans to another limited liability corporation that will buy unsecured assets held by money markets.


Most of the discount window loans — $91.3 billion — will mature within 15 days. Another $38.6 billion will come due in one to five years and $18.8 billion will be repaid in 16 to 90 days. The final $303 million matures within 91 days to one year.

Separate from the discount window loans, the Fed purchased $258.7 billion of commercial paper by Wednesday, a 4.3% increase from a week earlier.

Meanwhile, the Federal Reserve Bank of New York said it purchased $22.3 billion in mortgage backed securities: $10.5 billion from Fannie Mae; $9.7 billion from Freddie Mac and $2.1 billion from Ginnie Mae. Total purchases were up 32.7%.


Total assets fell 3.9%, to $1.9 trillion. Reserves held at the Fed by financial institutions fell 12.6%, to nearly $647 billion.

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