US Banks Borrow $165 Billion From Fed In A Week• March 17, 2023 4:11 pm • Comments
The collapse of three major banks in the US recently has caused many depositors to lose confidence in the banking system.
As a result, this may lead to many to start seeing crypto as a safer alternative as it allows for the self-custody of assets instead of relying on an institution.
So far, it is clear that there is some funding strains among the banks and this is proven by the fact that the Federal Reserve has recently lend around $165 billion to many banks in just the span of a week.
Whether or not this will impact the Fed’s mission to combat inflation is still unknown as it is unclear if this liquidity is being created by increasing the money supply or through other means.
With that being said, it is clear that investors should diversify and holding digital assets like XRP and BTC is likely a good strategy.
THIS IS AN ALL-TIME RECORD HIGH … that shows us how bad this could really get. And it reeks of bank desperation. No wonder the Washington Post just admitted the White House is scrambling behind the scenes to "avert meltdown." https://t.co/lvSgMZ00kf
— Tara Servatius (@TaraServatius) March 17, 2023
As far as the breakdown is concerned, $152.85 billion was borrowed via the discount window or the traditional liquidity backstop for banks.
The figure marked a new record high. For context, banks together borrowed only $4.58 billion last week, while the previous all-time high of $111 billion was registered during the 2008 financial crisis.
Additionally, banks have borrowed around $11.9 billion from the Fed’s new emergency backstop known as the Bank Term Funding Program. Launching the BTFP was one of the measures taken by regulators post the Silicon Valley Bank collapse.
The new lending program allows banks to take advances from the Fed for up to a year. This can be done by pledging treasuries, mortgage-backed bonds, and other debt as collateral. By allowing banks to pledge their bonds, banks can carry out customer withdrawals without having to sell them at a loss.
Recent news have also shown that First Republic Bank had to also be rescued by getting an additional $30 billion in liquidity from other banks.
Banks that contributed to the lending were other larger banks such as Bank of America, JP Morgan, and Citi.
Clearly, it seems that the banks are trying to support each other in order to prevent customers from losing more confidence in the system.
The problems also don’t seem to be just in the US as it seems that European Banks are also experiencing the effects of the SVB collapse.
However, despite the fears, the EU has decided to continue to raise interest rates in order to combat inflation.
It is unknown if the Federal Reserve will also continue to raise rates in order to fight inflation despite the recent banking collapse.
OOPS! Banks rush to borrow record-breaking $150bn from Fed's discount window this week, topping even a record set during the 2008 financial crisis, after the collapses of Silicon Valley Bank and Signature Bank. https://t.co/wtqLC7L1jf pic.twitter.com/z3RySx98eO
— Holger Zschaepitz (@Schuldensuehner) March 17, 2023
Banks took out $152.85 billion in loans using the Fed’s discount window—the central bank’s traditional backstop that provides loans for up to 90 days.
The staggering amount was a dramatic increase from the week prior, when banks took $4.58 billion in loans, according to the Wall Street Journal.
The borrowing shattered the previous weekly high of $111 billion recorded during the 2008 financial crisis, according to a Bloomberg analysis of Federal Reserve data.
Banks also took out another $11.9 billion in loans through the Fed’s new Bank Term Funding Program, which started Sunday and offers year-long loan terms.
US stocks fall as bank worries linger after firms borrow $165 billion from Fed to shore up liquidity https://t.co/aTjbtIWM3o
— Insider Business (@BusinessInsider) March 17, 2023
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