                                                                     For use at 12:00 p.m., eastern time
                                                                                              Thursday
                                                                                    December 11, 2008




FEDERAL RESERVE statistical release


Z.1




Flow of Funds Accounts
of the United States

Flows and Outstandings
Third Quarter 2008




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




                                                Third 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 3 percent in the third quarter, about 2
annual rate of 7 percent in the third quarter of 2008,       percentage points faster than in the previous quarter.
more than twice as fast as in the previous quarter. The       Federal government debt surged at an annual rate of
acceleration reflected a pickup in borrowing by the           39 percent in the third quarter, the largest quarterly
federal government.                                           growth rate recorded in the flow of funds accounts.

         Household debt contracted at an annual rate of                 At the end of the third quarter of 2008, the
 percent in the third quarter, after having posted a         level of domestic nonfinancial debt outstanding was
small increase in the previous quarter.     In the third      $33.0 trillion; household debt was $13.9 trillion,
quarter, home mortgage debt decreased at an annual            nonfinancial business debt was $11.0 trillion, and total
rate of 2 percent, and consumer credit rose only at an       government debt was $8.1 trillion.
annual rate of 1 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 3 percent in the third quarter, 2 percentage         $56.5 trillion at the end of the third quarter of 2008,
points less than in the previous quarter. The slowdown        $2.8 trillion dollars less than in the preceding quarter.
was concentrated in net bond issuance and commercial
mortgage borrowing.


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                 11.6           2.5                  8.3                  10.9
 2004                        8.9                 11.1           6.2                  7.4                   9.0
 2005                        9.5                 11.0           8.7                10.2                    7.0
 2006                        9.0                 10.2          10.5                  8.1                   3.9
 2007                        8.6                  6.8          13.1                  9.3                   4.9

 2007:Q1                     8.3                  7.3          10.5                10.9                    5.5
        Q2                   8.1                  7.2          12.9                10.0                    0.3
        Q3                   9.1                  6.1          14.3                  7.2                   8.0
        Q4                   8.0                  5.9          12.2                  7.7                   5.3

 2008:Q1                     5.3                  3.2           7.2                  3.4                   8.1
        Q2                   3.1                  0.6           5.6                  0.8                   5.9
        Q3                   7.2                 -0.8           2.9                  2.9                  39.2
1. Changes shown are on an end-of-period basis.

                                              Table of Contents



Title                                                                            Table     Page



Flow of Funds Accounts, Third 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, Third Quarter 2008

          This publication presents the flow of funds          Internal Revenue Service (IRS), Compustat, and
accounts for 2008:Q3.                                          Forbes.


Data revisions and other changes. The statistics in            7.    The    market     value      of residential real estate
the attached tables reflect the use of new or revised          (B.100, B.102, and B.103) has been revised from
source data. Most significant revisions appear in recent       2000:Q1 forward to reflect improved data sources. The
quarters; however, new source information resulted in          value of owner-occupied housing in 2001:Q3, 2003:Q2,
changes to data for earlier periods.                           and 2005:Q2 is now benchmarked to data from the
                                                               American Housing Survey, and changes in the value of
1.    In the nonfarm noncorporate business         sector      single-family homes in non-benchmark quarters are
(tables F.103 and L.103), data        have been revised        now estimated using a repeat-sales house-price index
from 2006:Q1 onward, owing to benchmark statistics             from LoanPerformance (a division of First American
available from the IRS/SOI for 2006.                           CoreLogic). Previously we used a price index from the
                                                               Federal Housing Finance Agency (formerly the Office
2.     The monetary authority sector (tables F.108 and         of Federal Housing Enterprise Oversight).
L.108) has been expanded to show new asset and
liability detail related to recent Federal Reserve actions.    Explanatory notes for tables D.1, D.2, and D.3.
                                                               Domestic debt comprises credit market funds borrowed
3.    The monetary authority sector (tables F.108, and         by   U.S. entities from     both        domestic and foreign
L.108) was modified to include two new additional              sources,   while     foreign  debt       represents    amounts
liability categories: security RPs and deposits due to         borrowed by foreign financial and nonfinancial entities
government-sponsored enterprises.                              in U.S. markets only.      Financial sectors consist of
                                                               government-sponsored enterprises, agency- and GSE-
4     The funding corporation sector (tables F.130,            backed    mortgage       pools,        and private     financial
F.215, L.130, and L.215) was modified to include loans         institutions.      Credit market debt consists of debt
extended    by    the  Federal    Reserve   to  American       securities, mortgages, bank loans, commercial paper,
International Group (AIG) in the liability category bank       consumer credit, U.S. government loans, and other
loans n.e.c.                                                   loans and advances; it excludes trade debt, loans for the
                                                               purpose of carrying securities, and funds raised from
5.    Due to the purchase of a large savings institution       equity sources.
by a commercial banking organization in 2008:Q3, the
U.S.-chartered commercial banks sector (table F.110)                     Growth rates in table D.1 are calculated by
reports larger than usual positive flows in certain            dividing seasonally adjusted flows from table D.2 by
instrument categories last quarter, while the savings          seasonally adjusted levels at the end of the previous
institutions sector (table F.114) reports some larger than     period from table D.3. Seasonally adjusted levels in
usual negative flows. The asset category most affected         flow of funds statistics are derived by carrying forward
by these reclassifications is mortgages; the liability         year-end levels by seasonally adjusted flows. Growth
categories most affected are time and savings deposits         rates calculated from changes in unadjusted levels
and other loans and advances.                                  printed in table L.2 can differ from those in table D.1.


6.    The    market    value of    corporate equities for      Relation of Flows to Outstandings.                 Estimates of
domestic firms (table L.213, lines 2 and 4) has been           financial assets and liabilities outstanding are linked to
revised from 1996:Q4 forward to reflect improved data          data on flows.       However, figures on outstandings
sources and methods: the value of common shares of             contain discontinuities or breaks in series that could
publicly traded firms is estimated from quarterly              affect analysis of particular relationships over time.
aggregates of micro-data from the Center for Research          Specifically, outstanding in the flow of funds accounts
in Security Prices; the value of preferred shares of           are related to the flows in the following way:
publicly traded firms is estimated using a perpetual
inventory method based on data from Standard and               Outstanding = Outstanding
                                                                            t                    t-1+ Flow + Discontinuity
                                                                                                              t              t
                                                                              B
                                                                                B
                                                                                                B
                                                                                                     B
                                                                                                             B
                                                                                                               B
                                                                                                                              B
                                                                                                                                B




Poor's and Thomson Financial Services; and the value           where "t" is the time period.

of closely held firms is estimated using data from the

  2


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



                                                                     location:
Preliminary Estimates.        Figures shown for the most
recent quarter in these tables are based on preliminary              www.federalreserve.gov/datadownload/Choose.aspx?rel=Z.1

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
of such discrepancies relative to the main asset or
liability components is one indication of the quality of
source data,   especially     on       an  annual   basis.   For
quarterly data, differences in seasonal adjustment
procedures for financial and nonfinancial components
of the accounts sometimes result in discrepancies that
cancel in annual data.


                                                                                                                 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 2007 for
   product accounts (NIPA)          adjusted, for 2008:Q3.                     the government sectors.
                                                                               Unadjusted flows since 2006 for
                                                                               all other sectors.

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:Q3. 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:Q3;            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:Q3.

4. Nonfarm noncorporate             IRS/SOI data through 2006; bank and           Statistics of Income data since
   business                         finance company loans and mortgage            2006.
   (tables F.103 and L.103)         borrowing through 2008:Q3.

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:Q3;
                                    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:Q3; 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:Q3.

4


 8. Rest of the world                Balance of payments data through        Balance of payments data for
    (U.S. international              2008:Q2. NIPA estimates; data from      2008:Q3.
    transactions)                    bank Reports of Condition and from
    (tables F.107 and L.107)         Treasury International Capital System
                                     through 2008:Q3.


 9. Monetary authority               All data through 2008:Q3.               None.
    (tables F.108 and L.108)


10. Commercial banking               All data through 2008:Q3 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:Q3.               None.
    (tables F.114 and L.114)

12. Credit unions                    All data through 2008:Q3.               None.
    (tables F.115 and L.115)

13. Property-casualty insurance      All data through 2008:Q2.               Data for 2008:Q3.
    companies
    (tables F.116 and L.116)

14. Life insurance companies         All data through 2008:Q2.               Data for 2008:Q3.
    (tables F.117 and L.117)

15. Private pension funds            Quarterly data through 2008:Q3;         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:Q3.
    (tables F.119 and L.119)         through 2008:Q2 from the Census
                                     Bureau.

17. Federal government retirement    Data from the Monthly Treasury          None.
    funds                            Statement of Receipts and Outlays, the
    (tables F.120 and L.120)         Thrift Savings Plan, and the National
                                     Railroad Retirement Investment Trust
                                     through 2008:Q3.

18. Money market mutual              All data through 2008:Q3.               None.
    funds
    (tables F.121 and L.121)

19. Mutual funds                     All data through 2008:Q3.               None.
    (tables F.122 and L.122)


20. Closed-end funds                 All data through 2008:Q3.               None.
    (tables F.123 and L.123)

21. Exchange-traded funds            All data through 2008:Q3.               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:Q3.

23. Agency- and GSE-backed      All data through 2008:Q3.                   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:Q3.

25. Finance companies           All data through 2008:Q3.                   None.
   (tables F.127 and L.127)

26. Real estate investment      Data from SNL REIT DataSource               None.
   trusts (REITs)               through 2008:Q3.
   (tables F.128 and L.128)

                                                                            None.
27. Security brokers and        Data for firms filing FOCUS and
   dealers                      FOGS reports through 2008:Q3.
   (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.

