                                                                     For use at 12:00 p.m., eastern time
                                                                                              Thursday
                                                                                   September 18, 2008




FEDERAL RESERVE statistical release


Z.1




Flow of Funds Accounts
of the United States

Flows and Outstandings
Second Quarter 2008




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




                                           Second Quarter 2008

         Debt of the domestic nonfinancial sectors is                   State and local government debt increased at
estimated to have expanded at a seasonally adjusted           an annual rate of  percent last quarter, 3 percentage
annual rate of 3 percent in the second quarter of 2008,      points less than in the previous quarter.        Federal
2 percentage points slower than in the previous quarter.      government debt expanded at an annual rate of
The deceleration was widespread across sectors.               6 percent in the second quarter.

         Household debt expanded at an annual rate of                   At the end of the second quarter of 2008, the
1 percent in the second quarter, 2 percentage points         level of domestic nonfinancial debt outstanding was
below the pace in the previous quarter. In the second         $32.4 trillion; household debt was $14.0 trillion,
quarter, growth of home mortgage debt decreased to an         nonfinancial business debt was $10.9 trillion, and total
annual rate of  percent, and consumer credit rose at an      government debt was $7.5 trillion.
annual rate of 4 percent.
                                                                        Household net worth--the difference between
         Nonfinancial business debt rose at an annual         the value of assets and liabilities--was an estimated
rate of 5 percent in the second quarter, 1 percentage       $56.0 trillion at the end of the second quarter of 2008,
points less than in the previous quarter. The slowdown        $0.4 trillion dollars less than in the preceding quarter.
was evident in all categories except net bond issuance.


Growth of Domestic Nonfinancial Debt1
                                           P
                                               P




Percentage changes; quarterly data are seasonally adjusted annual rates
                                                                                  State and
                            Total           Households       Business                                    Federal
                                                                                 local govts.
 1998                        6.6                  7.8          11.7                  6.2                  -1.4
 1999                        6.4                  8.4          10.8                  3.3                  -1.9
 2000                        5.0                  9.1           9.3                  1.4                  -8.0
 2001                        6.3                  9.6           5.8                  8.8                  -0.2
 2002                        7.3                 10.8           2.6                11.1                    7.6

 2003                        8.1                 11.5           2.5                  8.3                  10.9
 2004                        8.9                 11.2           6.2                  7.4                   9.0
 2005                        9.5                 11.2           8.5                10.2                    7.0
 2006                        9.1                 10.2          10.5                  8.1                   3.9
 2007                        8.6                  6.8          13.0                  9.3                   4.9

 2007:Q1                     8.1                  7.0          10.4                10.9                    5.5
        Q2                   8.0                  7.2          12.8                10.0                    0.3
        Q3                   9.1                  6.2          14.2                  7.2                   8.0
        Q4                   8.1                  6.1          12.1                  7.7                   5.3

 2008:Q1                     5.4                  3.3           7.4                  3.4                   8.1
        Q2                   3.5                  1.4           5.7                  0.5                   5.9
1. Changes shown are on an end-of-period basis.

                                              Table of Contents



Title                                                                            Table     Page



Flow of Funds Accounts, Second Quarter 2008                                                 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 2007                                             114                115

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




                       Flow of Funds Accounts, Second Quarter 2008

         This publication presents the flow of funds
accounts for 2008:Q2.                                          7.    The funding corporation sector (tables F.130,
                                                               F.215, L.130, and L.215) was modified to include bank
Data revisions and other changes. The statistics in            loans as an additional liability category, reflecting loans
the attached tables reflect the use of new or revised          extended by the Federal Reserve to Maiden Lane LLC
source data. Most significant revisions appear in recent       to facilitate the arrangements associated with JPMorgan
quarters; however, new source information resulted in          Chase & Co.'s acquisition of Bear Stearns Companies,
changes to data for earlier periods.                           Inc.


1.    Seasonal factors for quarterly flows have been           8.    Currency assets of the rest of the world sector
recalculated for the period 1998:Q1 onward. The                (tables F.204 and L.204) were revised from 1974:Q1
factors were generated using the X-12-ARIMA/88                 onward to reflect the addition of net currency shipments
seasonal adjustment program from Statistics Canada.            at the Miami Federal Reserve branch.


2.    The statistics in this publication reflect the annual    9.    Total consumer credit (tables F.222 and L.222)
revisions to the national income and product accounts          has been revised from 1998:Q1 forward owing to new
from 2005 forward released by the Bureau of Economic           seasonal factors and other changes reflected in the
Analysis (BEA) of the Department of Commerce on                Boards G.19 statistical release on September 8, 2008.
July 31, 2008, and subsequent information for 2008:Q2
released on August 28, 2008. The August 2008 issue of          Explanatory notes for tables D.1, D.2, and D.3.
the Survey of Current Business details the major
features of the annual revision of the national income         Domestic debt comprises credit market funds borrowed
and product accounts.                                          by U.S. entities from both domestic and foreign
                                                               sources,    while   foreign   debt  represents    amounts
3.    Data for investment and depreciation flows of all        borrowed by foreign financial and nonfinancial entities
sectors, and capital stocks for the household, nonfarm         in U.S. markets only.      Financial sectors consist of
nonfinancial    corporate     business,    and    nonfarm      government-sponsored enterprises, agency- and GSE-
noncorporate business sectors have been revised                backed     mortgage    pools,    and   private   financial
beginning in 2005 to reflect updated annual estimates of       institutions.    Credit market debt consists of debt
fixed assets from the BEA.                                     securities, mortgages, bank loans, commercial paper,
                                                               consumer credit, U.S. government loans, and other
4.    The  nonfarm nonfinancial corporate business             loans and advances; it excludes trade debt, loans for the
sector (tables F.102 and L.102) has been revised to            purpose of carrying securities, and funds raised from
include syndicated loans from domestic entities outside        equity sources.
the banking and finance company sectors. These loans
appear in the liability category other loans and                         Growth rates in table D.1 are calculated by
advances. Detail on the holdings of the six new lenders        dividing seasonally adjusted flows from table D.2 by
is shown on the other loans and advances tables (F.216         seasonally adjusted levels at the end of the previous
and L.216).    Source data for syndicated loans come           period from table D.3. Seasonally adjusted levels in
from the Shared National Credit Program and Reuters            flow of funds statistics are derived by carrying forward
LPC.                                                           year-end levels by seasonally adjusted flows. Growth
                                                               rates calculated from changes in unadjusted levels
5.    Revisions to the rest of the world sector (tables        printed in table L.2 can differ from those in table D.1.
F.107 and L.107) reflect new estimates of the balance
of payments and the international investment position          Relation of Flows to Outstandings.           Estimates of
from the BEA for 1974 through 2007.              The new       financial assets and liabilities outstanding are linked to
estimates are detailed in the July 2008 issue of the           data on flows.       However, figures on outstandings
Survey of Current Business.                                    contain discontinuities or breaks in series that could
                                                               affect analysis of particular relationships over time.
6.    The savings institution sector (table F.114) was         Specifically, outstanding in the flow of funds accounts
modified to include an additional liability category,          are related to the flows in the following way:
corporate equities.

2


Outstanding = Outstanding
             t                     t-1     + Flow + Discontinuity
                                                   t                     t       of such discrepancies relative to the main asset or
                B
                  B
                                     B
                                            B
                                                     B
                                                       B
                                                                          B
                                                                            B




where "t" is the time period.                                                    liability components is one indication of the quality of
                                                                                 source data,  especially on      an   annual    basis. For
          Discontinuities        result          from       changes     in       quarterly data, differences in seasonal adjustment
valuation, breaks in source data, and changes in                                 procedures for financial and nonfinancial components
definitions.       For most      series,        the      value      of the       of the accounts sometimes result in discrepancies that
discontinuity is zero for nearly all time periods.                               cancel in annual data.
However, in a few instances, the discontinuity is
nonzero for almost all time periods, or is quite large in a                      Availability of Data.    Flow of      funds statistics are
particular quarter, such as a period when there is a                             updated about ten weeks following the end of a quarter.
sharp increase or decrease in equity prices or a major                           This publication -- the Z.1 release -- is available from
break in source data.                                                            the Board's Publications Services. Flow of funds data
                                                                                 are also available electronically through the Internet at
          The discontinuities in a series can distort                            the following location:
estimated rates of growth in assets and liabilities
between    periods.           In order          to      minimize     these       http://www.federalreserve.gov/releases/Z1
distortions, percentage changes in assets and liabilities
in flow of funds releases should be calculated as:                                         The Internet site also provides quarterly data
                                                                                 beginning in 1952, organized in compressed files that
Percentage change = (Flow / Outstanding
                        t                  t                  t-1
                                                                ) * 100          correspond to the tables published in this release.
                          B
                            B
                                          B
                                             B
                                                              B
                                                                   B




                                                                                 There are files for quarterly data for seasonally adjusted
Preliminary Estimates.           Figures shown for the most                      flows, unadjusted flows, outstandings, balance sheets,
recent quarter in these tables are based on preliminary                          and debt (tables D.1, D.2, and D.3).
and incomplete information.                    A summary list of the
principal sources of information available when the                                        A Guide to the Flow of Funds Accounts
latest quarter's data were compiled is provided in a table                       is available. The 1,200-page Guide, published in two
following this introduction. The distinction between                             volumes in January 2000, explains in detail how the
"available" data and "missing" data is not between final                         U.S. financial accounts are prepared and the principles
and preliminary versions of data, but rather between                             underlying the accounts. The Guide can be purchased
those source estimates that are fully ready when the                             for $20.00 from the Board's Publications Services.
latest quarterly publication is compiled and those that                          Publications Services accepts orders accompanied by
are not yet completed.           However, the items that are                     checks as well as credit card orders.
shown as available are, in general, also preliminary in
the sense that they are subject to revision by source                                      The Internet site for this release at the location
agencies.                                                                        shown above contains a link to an order form for the
                                                                                 Guide that can be mailed or faxed to Publications
Margins of Uncertainty. Flow of funds statistics are                             Services. In addition, the Internet site includes a link to
subject to uncertainties resulting from measurement                              the Guide's descriptions of the tables in the flow of
errors in source data, incompatibilities among data from                         funds accounts.
different sources, potential revisions in both financial
and nonfinancial series, and incomplete data in parts of                         Subscription Information.          The Federal Reserve
the accounts. The size of these uncertainties cannot be                          Board charges for subscriptions to all statistical
quantified in precise statistical terms, but allowance for                       releases. Inquiries for releases should be directed to:
them is explicitly made throughout the accounts by the
inclusion of "discrepancies" for various sectors and                                         Publications Services, Stop 127
instrument types.          A discrepancy for a sector is the                                       Board of Governors
difference between its measured                 sources of funds and                         of the Federal Reserve System
its measured uses of funds. For an instrument category,                                20th Street and Constitution Avenue, N.W.
a discrepancy is the difference between measured funds                                           Washington, DC 20551
borrowed     through          the financial             instrument    and                            (202) 452-3244
measured funds lent through that instrument. The size


                                                                                                                 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 2006.
   product accounts (NIPA)          adjusted, for 2008: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 2008: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 2008:Q2;            2006.
   (tables F.102 and L.102)         Internal Revenue Service Statistics of
                                    Income (IRS/SOI) preliminary data
                                    through 2006; securities offerings,
                                    mortgages, bank loans, commercial
                                    paper, and other loans through
                                    2008:Q2.

4. Nonfarm noncorporate             IRS/SOI data through 2005; bank and           Statistics of Income data since
   business                         finance company loans and mortgage            2005.
   (tables F.103 and L.103)         borrowing through 2008: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           2006.
                                    equity in government-sponsored
                                    enterprises through 2008:Q2;
                                    preliminary data for checkable deposits
                                    and currency and trade payables
                                    through 2007.

6. State and local governments      Gross offerings and retirements of            Total financial assets since
  (tables F.105 and L.105)          municipal securities, deposits at banks,      2006:Q2 and selected financial
                                    and nonmarketable U.S. government             asset detail since 2004:Q2.
                                    security issues through 2008:Q2; total
                                    financial assets through 2006:Q2 from
                                    the Census Bureau; breakdown of
                                    financial assets through 2004:Q2 from
                                    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 and
                                    Treasury data for loan programs
                                    through 2008:Q2.

4


 8. Rest of the world                 Balance of payments data through         None.
    (U.S. international               2008:Q2. NIPA estimates; data from
     transactions)                    bank Reports of Condition and from
    (tables F.107 and L.107)          Treasury International Capital System
                                      through 2008:Q2.


 9.  Monetary authority               All data through 2008:Q2.                None.
     (tables F.108 and L.108)


 10. Commercial banking               All data through 2008:Q2 for             Data since 2007 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 2008:Q2.                None.
    (tables F.114 and L.114)

 12. Credit unions                    All data through 2008:Q2.                None.
    (tables F.115 and L.115)

 13. Property-casualty insurance      All data through 2008:Q1; preliminary    Final data for 2008:Q2.
     companies                        data for 2008:Q2.
    (tables F.116 and L.116)

 14. Life insurance companies         All data through 2008:Q1; preliminary    Final data for 2008:Q2.
    (tables F.117 and L.117)          data for 2008:Q2.

 15. Private pension funds            Quarterly data through 2008:Q2;          Form 5500 data since 2005.
    (tables F.118 and L.118)          Internal Revenue Service/Department
                                      of Labor/Pension Benefit Guaranty
                                      Corporation Form 5500 data through
                                      2005.

 16. State and local government       Detailed data through 2006:Q2 from       Detailed data since 2006:Q2 and
    employee retirement funds         the Census Bureau; sample data           sample data for 2008:Q2.
    (tables F.119 and L.119)          through 2008:Q1 from the Census
                                      Bureau.

 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 2008:Q2.

 18. Money market mutual              All data through 2008:Q2.                None.
    funds
    (tables F.121 and L.121)

 19. Mutual funds                     All data through 2008:Q2.                None.
    (tables F.122 and L.122)


 20. Closed-end funds                 All data through 2008:Q2.                None.
    (tables F.123 and L.123)

 21. Exchange-traded funds            All data through 2008:Q2.                None.
    (tables F.123 and L.123)

                                                                                                              5



22. Government-sponsored        Data for Fannie Mae, Freddie Mac,           None.
    enterprises                 FHLBs, Farmer Mac, FCS, FICO and
    (tables F.124 and L.124)    REFCORP through 2008:Q2.

23. Agency- and GSE-backed      All data through 2008: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
                                2008:Q2.

25. Finance companies           All data through 2008:Q2.                   None.
   (tables F.127 and L.127)

26. Real estate investment      Data from SNL REIT DataSource               None.
   trusts (REITs)               through 2008:Q2.
   (tables F.128 and L.128)

                                                                            None.
27. Security brokers and        Data for firms filing FOCUS and
   dealers                      FOGS reports through 2008: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.

