WASHINGTON (AP) – Commercial banks and investment firms borrowed less from the Federal Reserve’s emergency lending program last week, the government said Monday, although demand for the loans remains high amid a global credit crunch.

The Fed reported that commercial banks averaged $86.3 billion in daily borrowing over the week that ended Wednesday, down from $88.4 billion for the week that ended Dec. 17.

Investment firms, meanwhile, drew $45.7 billion in the week that ended Dec. 24, compared to an average of $50.5 billion the previous week. This category includes any loans that were made to the U.S. and London-based broker-dealer subsidiaries of Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. Inc.

The Fed report also showed that the central bank’s net holdings of commercial paper increased by $10.5 billion to $325.8 billion. Under a first of its kind program that began Oct. 27, the Fed is buying up commercial paper, the crucial short-term debt that companies use to pay everyday expenses, in an effort to unlock that market. The Fed has said about $1.3 trillion worth of commercial paper would qualify for the program.

The central bank has dramatically expanded its lending to commercial banks in recent months to help combat the credit crunch, which has made it difficult for banks to obtain loans anywhere else. Commercial banks borrowed only $4.8 billion from the Fed in the same week last year, according to the report.

In March, investment banks were given similar, emergency-loan privileges as commercial banks after a run on Bear Stearns pushed what was the nation’s fifth-largest investment bank to the brink of bankruptcy and into a takeover by JPMorgan Chase & Co.

The Fed doesn’t release the identities of the companies that borrow from it. Commercial banks and investment companies now pay just 0.50 percent in interest for the emergency loans. The rate had been 1.25 percent before being cut earlier this month.

All the new lending has ballooned the Fed’s balance sheet to $2.2 trillion, from just under $900 billion in September.

The report also showed that insurance giant American International Group’s loan from the Fed averaged $40 billion, down by $4.3 billion from the previous week.

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