Morgan Stanley and Goldman Sachs yesterday became the first American investment banks to use a new credit facility set up by the US Federal Reserve to prevent further meltdowns of securities firms.

America's central bank decided last weekend that it would extend the so-called discount window facility, through which it offers cheap loans to banks, to securities firms as well. The initiative, which came after the fire-sale of Bear Stearns to JPMorgan Chase after Bear was unable to meet its margin calls, also reduced the borrowing rate from 3.5 per cent to 2.5 per cent.

Borrowing from the discount window has been regarded as a sign of desperation, but the Fed is eager to remove that perception.

Colm Kelleher, the chief financial officer of Morgan Stanley, said: “We have tested the window because we want to remove the stigma from the window. It's meant to be there for normal business. It's not meant to be there as a last-recourse thing.

Goldman Sachs said that it was also “testing” the discount window, and CNBC reported yesterday that Lehman Brothers had borrowed $2 billion (£1 billion) under the programme. Lehman Brothers declined to comment. Goldman and Morgan Stanley did not disclose how much they had borrowed.

Morgan Stanley commented on its use of the discount window as it became the third US investment bank to beat analysts expectations this week. The group announced a 42 per cent drop in its first-quarter net income to $1.55 billion. Its figures were dragged down by $2.3 billion of writedowns relating to mortgages and leveraged loans used to finance private equity buyouts.

However, a 51 per cent jump in equity sales and trading revenues to a record $3.3 billion ensured that Morgan Stanley's first-quarter net income of $1.45 a share came in well ahead of the $1.01-a-share consensus analyst forecast. The group's revenues for the period fell by 17 per cent to $8.3 billion.

Morgan Stanley's results came a day after Goldman Sachs and Lehman Brothers had reported better-than-expected first-quarter profits, giving Wall Street hope that the outlook for banks might not be as dire as it seemed at the beginning of the week.

However, Adam Compton, an RCM Investors analyst, said that the American investment banking industry was “by no means out of the woods yet ... This week's better-than-expected results have obviously helped market psychology, but it is well to remember that it was on the back of hugely reduced expectations.”

Shares in Morgan Stanley closed up 59 cents at $43.45 in New York.

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