The Federal Reserve's balance sheet grew for a fifth consecutive week and closed in on its record size, with the rise stemming from its ongoing purchases of Treasuries, Fed data released on Thursday showed.
Last month, the U.S. central bank began a second bout of quantitative easing, known as QE2. The program is worth about $600 billion in U.S. government debt purchases over an eight-month period in an effort to stimulate the economy.
The balance sheet -- a broad gauge of Fed lending to the financial system -- rose to $2.329 trillion in the week ended December 1 from $2.328 trillion the previous week.
The Fed's balance sheet falls shy of the record peak of $2.333 trillion set in May as it was about to end its initial round of bond purchases that involved $300 billion of Treasuries and $1.425 billion in mortgage-related securities.
The Fed's QE2 follows its use of proceeds from maturing mortgage securities in its portfolio, a move that started in August. Since that time, it has purchased about a combined $149 billion in Treasuries.
The central bank's holding of U.S. government securities totaled $917.45 billion on Wednesday, up from $901.24 billion last week.
On the other hand, the Fed's ownership of mortgage bonds guaranteed by Fannie Mae
The Fed's holdings of debt issued by Fannie, Freddie and the Federal Home Loan Bank system totaled $148.18 billion, unchanged from the prior week.
Meanwhile, there have been concerns over bank exposure to the sovereign debt troubles in Europe spreading to the United States. The Fed has been directing more cash to banks since last month, but it is unclear whether the increased lending to banks stems from their loan problems in Europe.
The Fed's overnight direct loans to credit-worthy banks via its discount window averaged $191 million a day in the week ended Wednesday, faster than the $158 million daily pace last week.
(Reporting by Richard Leong, Editing by Chizu Nomiyama)