The Fed’s balance sheet continues to expand:

Oct. 30 (Bloomberg) — The Federal Reserve bought commercial paper valued at $145.7 billion in the first days of the program aimed at backstopping the market, indicating the central bank is generating most of this week’s record gains in short-term corporate borrowing.

The central bank extended $144.8 billion of loans as of yesterday to a unit that paid $143.9 billion for the debt, the Fed’s weekly balance-sheet report said today. Separately, direct loans to commercial banks rose to a record $110.7 billion yesterday from $107.5 billion a week earlier. Cash borrowing by securities firms totaled $79.5 billion, down from $102.4 billion.

The Fed is basically financing the US economy. They offer better terms and rates than private institutions so companies really have no choice but to take advantage. How will the Fed ever extract itself from the markets?

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