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Banks Borrowing up almost Double

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Discount window loans surge to $3.16 bln a day

Thu Sep 13, 2007 4:33pm ET138

NEW YORK, Sept 13 (Reuters) - Banks more than doubled their requests for cash at the Federal Reserve's discount window in the latest week, according to central bank data published on Thursday.

Financial institutions borrowed an average $3.16 billion per day in the week ending Sept. 12, compared with a $1.34 billion daily average for the prior week.

Primary credit borrowings on the day of Wednesday Sept. 12 were $7.152 billion, the biggest for any single day since the aftermath of the Sept. 11 2001 attacks on New York and Washington.

The Fed lowered the discount rate by a half percentage point earlier this month to 5.75 percent in an effort to combat a liquidity squeeze that began in high-risk subprime mortgages and has since spread to other sectors.

The latest figures show that banks were increasingly willing to tap the discount window, usually considered a loan of last resort. This had mixed implications, suggesting that markets could become more liquid but also possibly that the need for funds was increasing as the credit crunch lingers.

The bulk of the borrowing came from banks with strong credit ratings, with "primary credit" borrowing adding up to $2.93 billion.