Thursday, September 25, 2008
Source. A couple of commenters were asking the scope of the problem. Borrowed reserves largely reflect borrowing by nonbanks, but primary credit to banks rose $17.7 billion last week. The Fed this week injected $75 billion in new financing through its term auction facility. This injection of credit, as you can tell, is unprecedented. But banks are holding almost $70 billion in excess reserves, which could be a sign impending collapse in deposits (if the banks are correct that withdrawals are imminent.) M2 growth rates for the last quarter have been about 1.6%. What does this say about credit availability in the US?