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Banks borrowed slightly more from the Federal Reserve's emergency lending program over the past week, while reducing their use of other credit programs designed to ease the financial crisis.
The Fed said commercial banks averaged $22.6 billion in daily borrowing over the week that ended Wednesday. That's up $32 million from the week ended Oct. 28, but is far less than the $110 billion they borrowed a year ago at the height of the financial crisis.

The increase, while slight, was the first since the week of Sept. 2.

The identities of the financial institutions are not released. They pay just 0.50 percent in interest for the emergency, overnight loans.

The banks sharply cut their use of a separate program intended to boost the availability of short-term financing crucial for paying salaries and supplies.

Under that program, the Fed's net holdings of "commercial paper" averaged $15.6 billion, a drop of $16.6 billion from the previous week. At its peak in late January, the Fed held almost $350 billion of commercial paper.

Meanwhile, banks' use of short-term loans drawn from the Fed's "term auction credit" facility averaged $139.2 billion, unchanged from the previous week.

The limited borrowing shows banks are having a slightly easier time getting short-term loans in private markets.

But the improvement hasn't necessarily translated into easier terms for businesses and individuals. For them, the flow of credit is not back to normal. That's one reason Fed Chairman Ben Bernanke and other economists believe the nascent economic recovery will be weak.

The report Thursday also showed that the central bank is slowing its purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. Its holdings were valued at $774.5 billion over the past week, a drop of $1.6 billion from the previous week.

The Fed said in September that it would wrap up its effort to buy $1.25 trillion of the securities by the end of March, rather than by the end of this year. The goal of the program is to drive down mortgage rates and prop up the housing market.

The Fed said Wednesday, after a meeting of its governing board, that it will also reduce its buying of Fannie Mae and Freddie Mac securities to $175 billion from $200 billion. The central bank's weekly balance sheet said it now holds $146.9 billion of those securities, $5.4 billion higher than the previous week.

The Fed's purchasing programs have been credited with helping to force down mortgage rates.

Rates on 30-year home loans averaged 4.98 percent this week, down from 6.2 percent last year, according to mortgage company Freddie Mac. The rate was 5.03 percent last week.

The Fed said Wednesday, after a meeting of its governing board, that it will also reduce its buying of Fannie Mae and Freddie Mac securities to $175 billion from $200 billion. The central bank's weekly balance sheet said it now holds $146.9 billion of those securities, $5.4 billion higher than the previous week.

So it can only pick up an additional 175 - 146.9 = 28.1 Billion? That may cause a problem from here

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