                                                                     For use at 12:00 p.m., eastern time
                                                                                               Tuesday
                                                                                   September 19, 2006




FEDERAL RESERVE statistical release


Z.1




Flow of Funds Accounts
of the United States

Flows and Outstandings
Second Quarter 2006




Board of Governors of the Federal Reserve System, Washington DC 20551

                                Flow of Funds Summary Statistics
                                C




                                            Second Quarter 2006

          Debt of the domestic nonfinancial sectors rose               State and local government debt rose at an
at a seasonally adjusted annual rate of 6-1/2 percent in      annual rate of 6-1/2 percent in the second quarter, after
the second quarter of 2006, three percentage points           having increased only 3-1/2 percent in the previous
slower than in the previous quarter. The deceleration in      quarter. The second-quarter acceleration of municipal
domestic nonfinancial debt was accounted for by               debt reflected stronger net issuance for capital projects
decreased borrowing by all sectors except state and           and advance refundings. In the second quarter of 2006,
local governments.                                            federal government debt contracted at a seasonally
                                                              adjusted annual rate of 2-1/2 percent, following an
          Household debt expanded at an annual rate of        11-1/4 percent increase in the previous quarter.
9 percent in the second quarter of 2006, a bit less
rapidly than in the previous quarter. Consumer credit                  At the end of the second quarter of 2006, the
posted a sizeable increase in the second quarter, but         level of domestic nonfinancial debt outstanding was
growth of home mortgage debt slowed to a single-digit         $27.7 trillion. Household debt amounted to $12.4
pace for the first time in several years. In the second       trillion, and nonfinancial business debt was $8.6
quarter, nonfinancial business debt rose at a 7-1/2           trillion. Combined, state and local governments and
percent pace, two percentage points less than the rate in     the federal government had outstanding debt of $6.7
the first quarter. The deceleration of business debt last     trillion.
quarter mainly reflected slower short-term lending by
banks and other financial institutions.



Growth of Domestic Nonfinancial Debt1
                                           P   P



Percentage changes; quarterly data are seasonally adjusted annual rates

                           Total            Households       Business            State and
                                                                                local govts.            Federal

 1996                        5.2                 6.7            6.2                -1.5                   4.0
 1997                        5.3                  5.8           9.0                4.3                    0.6
 1998                        6.8                 7.8           12.3                6.3                   -1.4
 1999                        6.4                 8.4           10.7                3.4                   -1.9
 2000                        4.9                 9.0            9.2                1.3                   -8.0

 2001                        6.3                 9.4            6.0                8.8                   -0.2
 2002                        7.2                 10.6           2.5               11.0                    7.6
 2003                        8.2                 11.6           2.6                 8.3                  10.9
 2004                        8.9                 11.6           5.9                 7.4                   9.0
 2005                        9.5                 11.7           7.7               10.2                    7.0

 2005:Q1                     9.3                  9.6           6.5                9.9                   13.0
        Q2                   8.2                 11.9           7.7                 7.4                   0.6
        Q3                   9.7                 11.9           8.1               12.3                    5.8
        Q4                   9.6                 11.7           7.7                 9.7                   8.0

 2006:Q1                     9.5                  9.6           9.6                3.5                   11.3
        Q2                   6.4                  9.1           7.6                 6.6                  -2.4
1. Changes shown are on an end-of-period basis.

                                              Table of Contents


Title                                                                           Table     Page


Flow of Funds Accounts, Second Quarter 2006                                                1

Availability of Data for Latest Quarter                                                    3

Debt Growth by Sector                                                            D.1       6

Borrowing by Sector                                                              D.2       7

Debt Outstanding by Sector                                                       D.3       8




                                                                    Flows           Levels
Title                                                           Table    Page   Table     Page



Summaries

Total Net Borrowing and Lending in Credit Markets               F.1       9     L.1       58

Credit Market Borrowing by Nonfinancial Sectors                 F.2      10     L.2       59

Credit Market Borrowing by Financial Sectors                    F.3      10     L.3       59

Credit Market Borrowing, All Sectors, by Instrument             F.4      11     L.4       60

Total Liabilities and Its Relation to Total Financial Assets    F.5      11     L.5       60

Distribution of Gross Domestic Product                          F.6      12

Distribution of National Income                                 F.7      13

Saving and Investment                                           F.8      14

Net Capital Transfers                                           F.9      14

Derivation of Measures of Personal Saving                       F.10     15     L.10      61

                                                            Flows           Levels
Title                                                   Table    Page   Table     Page


Sectors

Households and Nonprofit Organizations                  F.100    16     L.100     62

Nonfinancial Business                                   F.101    17     L.101     63

         Nonfarm Nonfinancial Corporate Business        F.102    18     L.102     64

         Nonfarm Noncorporate Business                  F.103    19     L.103     65

         Farm Business                                  F.104    19     L.104     65

State and Local Governments                             F.105    20     L.105     66

Federal Government                                      F.106    21     L.106     66

Rest of the World                                       F.107    22     L.107     67

Monetary Authority                                      F.108    23     L.108     68

Commercial Banking                                      F.109    24     L.109     69

         U.S.-Chartered Commercial Banks                F.110    25     L.110     70

         Foreign Banking Offices in U.S.                F.111    26     L.111     71

         Bank Holding Companies                         F.112    27     L.112     72

         Banks in U.S.-Affiliated Areas                 F.113    27     L.113     72

Savings Institutions                                    F.114    28     L.114     73

Credit Unions                                           F.115    29     L.115     74

Property-Casualty Insurance Companies                   F.116    29     L.116     74

Life Insurance Companies                                F.117    30     L.117     75

Private Pension Funds                                   F.118    30     L.118     75

State and Local Government Employee Retirement Funds    F.119    31     L.119     76

Federal Government Retirement Funds                     F.120    31     L.120     76

Money Market Mutual Funds                               F.121    32     L.121     77

Mutual Funds                                            F.122    32     L.122     77

                                                        Flows           Levels
Title                                               Table    Page   Table     Page


Closed-End and Exchange-Traded Funds                F.123    32     L.123     77

Government-Sponsored Enterprises                    F.124    33     L.124     78

Agency- and GSE-backed Mortgage Pools               F.125    33     L.125     78

Issuers of Asset-Backed Securities                  F.126    34     L.126     79

Finance Companies                                   F.127    34     L.127     79

Real Estate Investment Trusts                       F.128    35     L.128     80

Security Brokers and Dealers                        F.129    36     L.129     81

Funding Corporations                                F.130    36     L.130     81




Instruments

Gold and Official Foreign Exchange Holdings         F.200    37     L.200     82

SDR Certificates and Treasury Currency              F.201    37     L.201     82

U.S. Deposits in Foreign Countries                  F.202    37     L.202     82

Net Interbank Transactions                          F.203    38     L.203     83

Checkable Deposits and Currency                     F.204    39     L.204     84

Time and Savings Deposits                           F.205    40     L.205     85

Money Market Mutual Fund Shares                     F.206    40     L.206     85

Federal Funds and Security Repurchase Agreements    F.207    41     L.207     86

Open Market Paper                                   F.208    41     L.208     86

Treasury Securities                                 F.209    42     L.209     87

                                                                    Flows            Levels

Title                                                          Table     Page   Table     Page


Agency- and GSE-backed Securities                              F.210     43     L.210      88

Municipal Securities and Loans                                 F.211     44     L.211      89

Corporate and Foreign Bonds                                    F.212     44     L.212      89

Corporate Equities                                             F.213     45     L.213      90

Mutual Fund Shares                                             F.214     45     L.214      90

Bank Loans Not Elsewhere Classified                            F.215     46     L.215      91

Other Loans and Advances                                       F.216     47     L.216      92

Total Mortgages                                                F.217     48     L.217      93

         Home Mortgages                                        F.218     49     L.218      94

         Multifamily Residential Mortgages                     F.219     49     L.219      94

         Commercial Mortgages                                  F.220     50     L.220      95

         Farm Mortgages                                        F.221     50     L.221      95

Consumer Credit                                                F.222     51     L.222      96

Trade Credit                                                   F.223     51     L.223      96

Security Credit                                                F.224     51     L.224      96

Life Insurance and Pension Fund Reserves                       F.225     52     L.225      97

Taxes Payable by Businesses                                    F.226     52     L.226      97

Proprietors' Equity in Noncorporate Business                   F.227     52     L.227      97

Total Miscellaneous Financial Claims                           F.228     53     L.228      98

         Identified Miscellaneous Financial Claims - Part I    F.229     54     L.229      99

         Identified Miscellaneous Financial Claims - Part II   F.230     55     L.230     100

         Unidentified Miscellaneous Financial Claims           F.231     56     L.231     101

Sector Discrepancies                                           F.11      57

Instrument Discrepancies                                       F.12      57

                                                                    Balance       Reconciliation
                                                                     Sheet
Title                                                           Table     Page   Table       Page


Balance Sheet and Reconciliation Tables

Households and Nonprofit Organizations                           B.100    102    R.100      105

Nonfinancial Corporate Business                                  B.102    103    R.102      106

Nonfarm Noncorporate Business                                    B.103    104    R.103      107




                                                                     Flows           Levels
Title                                                           Table     Page   Table       Page


Supplementary Tables

Nonprofit Organizations                                          F.100.a  108    L.100.a    109

Consolidated Statement for Federal, State, and Local Governments F.106.c  110    L.106.c    111

Private Pension Funds: Defined Benefit Plans                     F.118.b  112    L.118.b    113

Private Pension Funds: Defined Contribution Plans                F.118.c  112    L.118.c    113

Individual Retirement Accounts (IRAs)                            F.225.i  112    L.225.i    113

Flow of Funds Matrix for 2005                                             114                115

Balance Sheet of Households and Nonprofit Organizations
 with Equity Detail                                                              B.100.e     116

                                                                                                                 1




                      Flow of Funds Accounts, Second Quarter 2006

         This publication presents the flow of funds         7.        The issuers of asset-backed securities (ABS)
accounts for 2006:Q2.                                        sector (tables F.126 and L.126) was modified to include
                                                             an additional asset category, Treasury securities.
Data revisions and other changes. The statistics in          Estimates of this sector's holdings of commercial and
the attached tables reflect the use of new or revised        multi-family residential mortgages have been revised
source data. Most significant revisions appear in recent     from 1997:Q1 forward to reflect new data.
quarters; however, new source information resulted in
changes to data for earlier periods.                         8.        Data for the finance company sector (tables
                                                             F.127 and L.127) have been revised beginning in
1.       Seasonal factors for quarterly financial flows      2000:Q3 as a result of benchmarking to the Federal
have been recalculated for the period 1996:Q1 onward.        Reserve System's 2005 quinquennial finance company
The factors were generated using the X-12-ARIMA/88           survey.    The survey gathered asset and liability
seasonal adjustment program.                                 information as of December 31, 2005.

2.       The statistics in this publication reflect the      9.        The mortgage company sector (previously
annual revisions to the national income and product          shown in tables F.128 and L.128) has been combined
accounts from 2003 forward released by the Bureau of         with the finance company sector (tables F.127 and
Economic Analysis (BEA) of the Department of                 L.127). All sector flow and level tables after F.127 and
Commerce on July 28, 2006, and subsequent                    L.127 have been renumbered.
information for 2006:Q2 released on August 30, 2006.
The August 2006 issue of the Survey of Current               10.       Total consumer credit (tables F.222 and L.222)
Business details the major features of the annual            has been revised from 1996:Q1 forward owing to new
revision of the national income and product accounts.        seasonal factors and other changes reflected in the
                                                             Board's G.19 statistical release on September 8, 2006.
3.       Data for investment and depreciation flows of
all sectors, and capital stocks for the household,           Explanatory notes for tables D.1, D.2, and D.3.
nonfarm nonfinancial corporate business, and nonfarm         Domestic debt comprises credit market funds borrowed
noncorporate business sectors have been revised              by U.S. entities from both domestic and foreign
beginning in 2003 to reflect updated annual estimates of     sources, while foreign debt represents amounts
fixed assets from the BEA.                                   borrowed by foreign financial and nonfinancial entities
                                                             in U.S. markets only. Financial sectors consist of
4.       Revisions to the rest of the world sector (tables   government-sponsored enterprises, agency- and GSE-
F.107 and L.107) reflect new estimates of the balance        backed mortgage pools, and private financial
of payments and the international investment position        institutions.   Credit market debt consists of debt
from the BEA for 1995 through 2005.            The new       securities, mortgages, bank loans, commercial paper,
estimates are detailed in the July 2006 issue of the         consumer credit, U.S. government loans, and other
Survey of Current Business.                                  loans and advances; it excludes trade debt, loans for the
                                                             purpose of carrying securities, and funds raised from
5.       The rest of the world sector (tables F.107 and      equity sources.
L.107) was modified to include an additional asset
category, municipal securities.                                        Growth rates in table D.1 are calculated by
                                                             dividing seasonally adjusted flows from table D.2 by
6.       For the private pension fund sector (tables         seasonally adjusted levels at the end of the previous
F.118, F.118.b, F.118.c and L.118, L.118.b, L.118.c),        period from table D.3. Seasonally adjusted levels in
estimates have been revised to reflect figures from the      flow of funds statistics are derived by carrying forward
U.S.   Internal   Revenue      Service/Department      of    year-end levels by seasonally adjusted flows. Growth
Labor/Pension Benefit Guaranty Corporation Form              rates calculated from changes in unadjusted levels
5500 filed for plan year 2002.                               printed in table L.2 can differ from those in table D.1.

 2

Relation of Flows to Outstandings. Estimates of                    measured funds lent through that instrument. The size
financial assets and liabilities outstanding are linked to         of such discrepancies relative to the main asset or
data on flows.      However, figures on outstandings               liability components is one indication of the quality of
contain discontinuities or breaks in series that could             source data, especially on an annual basis. For
affect analysis of particular relationships over time              quarterly data, differences in seasonal adjustment
specifically, outstanding in the flow of funds accounts            procedures for financial and nonfinancial components
are related to the flows in the following way:                     of the accounts sometimes result in discrepancies that
                                                                   cancel in annual data.
Outstanding = Outstanding + Flow + Discontinuity
             t
             B B              t-1
                              B     B      t
                                           B B              t
                                                            B B


where "t" is the time period.                                      Availability of Data. Flow of funds statistics are
                                                                   updated about ten weeks following the             end of a
          Discontinuities result from changes in                   quarter. This publication -- the Z.1 release -- is
valuation, breaks in source data, and changes in                   available from the Board's Publications Services. Flow
definitions. For most series, the value of the                     of funds data are also available electronically through
discontinuity is zero for nearly all time periods.                 the Internet at the following location:
However, in a few instances, the discontinuity is
nonzero for almost all time periods, or is quite large in a        http://www.federalreserve.gov/releases/Z1
particular quarter, such as a period when there is a
sharp increase or decrease in equity prices or a major                       The Internet site also provides quarterly data
break in source data.                                              beginning in 1952, organized in compressed files that
                                                                   correspond to the tables published in this release.
          The discontinuities in a series can distort              There are files for quarterly data for seasonally adjusted
estimated rates of growth in assets and liabilities                flows, unadjusted flows, outstandings, balance sheets,
between periods.           In order to minimize these              and debt (tables D.1, D.2, and D.3).
distortions, percentage changes in assets and liabilities
in flow of funds releases should be calculated as:                           A Guide to the Flow of Funds Accounts           is
                                                                   available. The 1,200-page Guide, published in two
Percentage change = (Flow / Outstanding ) * 100
                      t                                            volumes in January 2000, explains in detail how the
                      B  B      t  B  B           t-1
                                                  B    B



                                                                   U.S. financial accounts are prepared and the principles
Preliminary Estimates. Figures shown for the most                  underlying the accounts. The Guide can be purchased
recent quarter in these tables are based on preliminary            for $20.00 from the Board's Publications Services.
and incomplete information. A summary list of the                  Publications Services accepts orders accompanied by
principal sources of information available when the                checks as well as credit card orders.
latest quarter's data were compiled is provided in a table
following this introduction. The distinction between                         The Internet site for this release at the location
"available" data and "missing" data is not between final           shown above contains a link to an order form for the
and preliminary versions of data, but rather between               Guide that can be mailed or faxed to Publications
those source estimates that are fully ready when the               Services. In addition, the Internet site includes a link to
latest quarterly publication is compiled and those that            the Guide's descriptions of the tables in the flow of
are not yet completed. However, the items that are                 funds accounts.
shown as available are, in general, also preliminary in
the sense that they are subject to revision by source              Subscription Information.          The Federal Reserve
agencies.                                                          Board charges for subscriptions to all statistical
                                                                   releases. Inquiries for releases should be directed to:
Margins of Uncertainty. Flow of funds statistics are
subject to uncertainties resulting from measurement                            Publications Services, Stop 127
errors in source data, incompatibilities among data from                             Board of Governors
different sources, potential revisions in both financial                       of the Federal Reserve System
and nonfinancial series, and incomplete data in parts of                 20th Street and Constitution Avenue, N.W.
the accounts. The size of these uncertainties cannot be                            Washington, DC 20551
quantified in precise statistical terms, but allowance for                              (202) 452-3244
them is explicitly made throughout the accounts by the
inclusion of "discrepancies" for various sectors and
instrument types. A discrepancy for a sector is the
difference between its measured sources of funds and
its measured uses of funds. For an instrument category,
a discrepancy is the difference between measured funds
borrowed through the financial instrument and

                                                                                                                 3



                          Availability of Data for Latest Quarter



                                   Available at time of publication            Major items missing
                                   U                                     U      U                     U




1. National income and              Preliminary estimates, seasonally            Unadjusted flows since 2004.
   product accounts (NIPA)          adjusted, for 2006:Q2.

2. Households and nonprofit         Estimates for this sector are largely residuals and are derived from data for
   organizations sector             other sectors. Availability of data depends on schedules for other sectors.
   (tables F.100 and L.100)         Data for consumer credit, which are estimated directly, are available
                                    through 2006:Q2. The source for nonprofit organizations data (tables
                                    F.100.a and L.100.a) is the Internal Revenue Service Statistics of Income.
                                    Data for nonprofit organizations are available for 1987 through 2000.

3. Nonfarm nonfinancial             Quarterly Financial Report (QFR) of           Statistics of Income data since
   corporate business               the Census Bureau through 2006:Q2;            2004.
   (tables F.102 and L.102)         Internal Revenue Service Statistics of
                                    Income (IRS/SOI) preliminary data
                                    through 2004; securities offerings,
                                    mortgages, bank loans, commercial
                                    paper, and other loans through
                                    2006:Q2.

4. Nonfarm noncorporate             IRS/SOI data through 2003; bank and           Statistics of Income data since
   business                         finance company loans and mortgage            2003.
   (tables F.103 and L.103)         borrowing through 2006:Q2.

5. Farm business                    Mortgages, bank loans, loans from             Consumption of fixed capital
   (tables F.104 and L.104)         government-sponsored enterprises,             and undistributed profits since
                                    U.S. government loans to farms, and           2003.
                                    equity in government-sponsored
                                    enterprises through 2006:Q2;
                                    preliminary data for checkable deposits
                                    and currency and trade payables
                                    through 2004.

6. State and local governments      Gross offerings and retirements of            Selected financial asset items
   (tables F.105 and L.105)         municipal securities, deposits at banks,      since 2004:Q2.
                                    and nonmarketable U.S. government
                                    security issues through 2006:Q2;
                                    selected financial assets through
                                    2004:Q2 from Census data and the
                                    comprehensive annual financial reports
                                    of state and local governments.

7. Federal government               Data from the Monthly Treasury                None.
   (tables F.106 and L.106)         Statement of Receipts and Outlays
                                    through 2006:Q2; Treasury data for
                                    loan programs through 2006:Q2.

4


 8. Rest of the world               Balance of payments data through        None.
     (U.S. international            2006:Q2; NIPA estimates; data from
     transactions)                  bank Reports of Condition and from
     (tables F.107 and L.107)       Treasury International Capital System
                                    through 2006:Q2.


 9. Monetary authority              All data through 2006:Q2.               None.
     (tables F.108 and L.108)


 10. Commercial banking             All data through 2006:Q2 for            Data since 2005 for branches of
     (tables F.109 through F.113    U.S.-chartered commercial banks,        domestic commercial banks
     and tables L.109 through       foreign banking offices in the U.S.,    located in U.S.-affiliated areas.
     L.113)                         bank holding companies, and
                                    commercial banks in U.S.-affiliated
                                    areas.

 11. Savings institutions           All data through 2006:Q2.               None.
     (tables F.114 and L.114)

 12. Credit unions                  All data through 2006:Q2.               None.
     (tables F.115 and L.115)

 13. Property-casualty insurance    All data through 2005:Q4; preliminary   Final data since 2006:Q1.
     companies                      data for 2006:Q1.
     (tables F.116 and L.116)

 14. Life insurance companies       All data through 2005:Q4; preliminary   Final data since 2006:Q1.
     (tables F.117 and L.117)       data for 2006:Q1.

 15. Private pension funds          Quarterly data through 2006:Q2;         Form 5500 data since 2002.
     (tables F.118 and L.118)       Internal Revenue Service/Department
                                    of Labor/Pension Benefit Guaranty
                                    Corporation Form 5500 data through
                                    2002.

 16. State and local government     Selected financial assets through       Data for 2006:Q2.
     employee retirement funds      2006:Q1 from Census data and the
     (tables F.119 and L.119)       comprehensive annual financial reports
                                    of state and local pension funds.

 17. Federal government retirement  Data from the Monthly Treasury          None.
     funds                          Statement, the Thrift Savings Plan, and
     (tables F.120 and L.120)       the National Railroad Retirement
                                    Investment Trust through 2006:Q2.

 18. Money market mutual            All data through 2006:Q2.               None.
     funds
     (tables F.121 and L.121)


 19. Mutual funds                   All data through 2006:Q2.               None.
     (tables F.122 and L.122)



 20. Closed-end funds               All data through 2006:Q2.               None.
     (tables F.123 and L.123)

                                                                                                           5



21. Exchange-traded funds       All data through 2006:Q2.                   None.
    (tables F.123 and L.123)

22. Government-sponsored        Data for FHLBs, Farmer Mac, FCS,            Much of the source data for
    enterprises                 FICO and REFCORP through                    Fannie Mae beginning in
    (tables F.124 and L.124)    2006:Q2. Complete data for Fannie           2004:Q3 and for Freddie Mac
                                Mae through 2004:Q2 and for Freddie         beginning in 2005:Q3.
                                Mac through 2005:Q2.

23. Agency- and GSE-backed      All data through 2006:Q2.                   None.
    mortgage pools
    (tables F.125 and L.125)

24. Issuers of asset-backed     All data for private mortgage pools,        None.
    securities (ABSs)           consumer credit, business loans,
    (tables F.126 and L.126)    student loans, consumer leases, and
                                trade credit securitization through
                                2006:Q2.

25. Finance companies           All data through 2006:Q2.                   None.
    (tables F.127 and L.127)
26. Real estate investment      Data from SNL REIT DataSource               None.
    trusts (REITs)              through 2006:Q2.
    (tables F.128 and L.128)

27. Security brokers and        Data for firms filing FOCUS and             None.
    dealers                     FOGS reports through 2006:Q2.
    (tables F.129 and L.129)

28. Funding corporations        Estimates for this sector are largely residuals and are derived from data for
    (tables F.130 and L.130)    other sectors.

