UPDATE 1-U.S. banks' direct borrowing hits record in week

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NEW YORK, Sept 4 (Reuters) - U.S. banks' direct borrowing from the Federal Reserve hit another record in the latest week, underscoring banks' reluctance to lend to each other, Fed data showed on Thursday.

Primary credit borrowings by banks from the Fed averaged a record $18.98 billion per day in the latest week, surpassing last week's average of $18.47 billion per day.

"There are still some concerns about credit availability. Banks' unwillingness to lend to each other remains elevated," said Kevin Nicholson, senior fixed-income strategist at Wachovia Securities in St. Louis.

This reluctance among banks has made it tough for consumers and businesses to obtain loans to buy homes and to finance their operations.

All discount window borrowings by banks and Wall Street dealers averaged $19.07 billion per day in the week ended Wednesday, compared with an average $18.57 billion per day the week before.

Dealers again did not tap the Primary Dealer Credit Facility, one of several programs the Fed introduced to provide cheap financing to financial institutions pinched by the credit crisis.

Wall Street dealers used the PDCF when it first opened. In the week ended March 26, total discount window borrowings averaged a record daily rate of $33.481 billion.

While the financial strain on Wall Street firms has subsided from the peak seen in early March, credit conditions have remained difficult, according to two regional Fed presidents who spoke on Thursday.

Dallas Fed President Richard Fisher told reporters after a speech that credit markets are "in the process of healing. It is just, I think, going to take some time." [ID:nWAT009979]

At a separate event, San Francisco Fed chief Janet Yellen said financial market conditions are still fragile, while the Fed's various liquidity measures have been helpful. [ID:nNAT004342] (Reporting by Richard Leong; Editing by Leslie Adler)