The Federal Reserve Bank of New York said Thursday that the value of the Bear Stearns portfolio it has held since that firm's acquisition by JPMorgan Chase declined by $1 billion to $28.9 billion.

CNBC.com

In March, in a highly unusual move, the Fed provided the financing for JPMorgan

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[JPM  Loading...      ()   ] to acquire Bear Stearns in order to prevent Bear from going bankrupt and potentially dragging down the entire financial system.

Part of that deal was that the Fed would hold the Bear assets.

The value the Fed now places on Bear's portfolio is important as a benchmark for how mortgage-backed assets have performed since March, said William Sullivan, chief economist at JVB Financial Group.

Many analysts expected the value of the Bear Stearns loan to show a drop in value over the three months the Fed has held the bonds and other securities.

The Fed's valuation of the Bear Stearns portfolio may provide some measure relief to investors and market-watchers. If the portfolio's value had dropped to below about $24 billion, that would have indicated that mortgage-backed securities have fared even worse in the second quarter than markets have already reflected, analysts said.

U.S. banks' direct borrowing from the Federal Reserve at the discount window slipped in the latest week, Fed data showed on Thursday.

Banks' discount window borrowings averaged $16.78 billion per day in the week ended July 2, compared with an average $20.87 billion per day a week earlier.

Primary credit borrowings averaged $14.86 billion per day in the latest week, up from $14.70 billion per day the previous week.

Dealers borrowed an average $1.74 billion per day from the Primary Dealer Credit Facility (PDCF), down from $6.10 billion average per day the week before.

The PDCF is one of several programs the Fed has introduced to provide cheap financing to financial institutions pinched by the credit crisis.

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