Leading leaders borrow $2b from Fed

Citigroup and four other top banks took the rare step of borrowing more than $2 billion total from the US Federal Reserve, the banks said on Wednesday, in a bid to reassure markets and remove the stigma of getting short-term financing from the central bank.

US shares rose after the moves, as the banks' borrowing signaled battered credit markets may start to heal.

Borrowing money directly from the Fed has historically been seen as a sign of weakness, but Bank of America, Germany's Deutsche Bank, JPMorgan Chase & Co and Wachovia Corp said they did it for the sake of the financial system.

All five banks emphasized they have access to other, cheaper funds.

With the four largest US banks and a major international bank having borrowed from the Fed through the central bank's discount window, others may be more willing to follow, analysts said.

"The psychology is, if a bank needs to borrow from the discount window, and they think there's a stigma attached to it, they can say, 'Citi has done it, too'," said Robert Albertson, chief strategist at Sandler O'Neill in New York.

Agencies

(China Daily 08/24/2007 page16)