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Home Regulation

Federal Reserve’s Bailout to Banks Surges to a Weekly High of $103B

by Dan K
Jun 30, 2023 - 2:00 pm
in Regulation
Changchun Mu, PBOC executive, speaking at a trade forum in Beijing about the future of the digital yuan.

Federal Reserve’s banking bailouts reach a new weekly high of $103B

The United States Federal Reserve’s emergency fund for embattled banks has seen its highest level of distressed asset redemptions since its inception three months ago.

The Lifeline: Bank Term Funding Program (BTFP)

The emergency lending program — known as the Bank Term Funding Program (BTFP) — was introduced in March amid the United States banking crisis which saw the collapse of Silicon Valley Bank, among others. The fund essentially is aimed at backstopping banks and other depository firms.

According to data from the Federal Reserve Bank of St. Louis, the Fed’s Bank Term Funding Program (BTFP) has reached a record level of $103.08 billion in loans for the week ending June 28.

Implications of the Surge

The milestone figure means that the Fed is still bailing out banks despite its attempts to reassure investors that the banking crisis is over. Market analyst Joe Consorti also opined on the latest figures, claiming that the “Fed’s shadow liquidity is propping up risk-taking behavior across markets.”

This may encourage investors to take larger risks as evidenced by increases in stock markets such as the S&P 500, he said.

Need for New Measures

“Imho the Fed will definitely have to create a new facility to buy distressed CRE loans and maybe even CMBS,” said Consorti, referring to commercial real estate and commercial mortgage-backed securities.

Regulators’ Response to Crisis

According to Reuters, U.S. banking regulators have been asking lenders to work with credit-worthy borrowers that are facing stress as commercial real estate lending remains under pressure.

The Bigger Picture

Furthermore, the BTFP peak has come in the same week that the Federal Reserve announced its banking stress test results, passing the top 23 lenders in the country.

American banks are not the only ones in trouble. According to a Bloomberg report earlier this week, Germany’s Bundesbank may need a bailout for losses on bonds acquired as part of the European Central Bank asset-purchase programs.

The Telegraph reported that it is a wider problem as after “trillions of dollars of such central bank money-printing worldwide, the chickens are coming home to roost,” with banks drowning in debts amid rising interest rates.

Tags: BanksBusinessFederalReserveUS
Dan K

Dan K

Dan K, the chief editor, is a visionary wordsmith, shaping narratives with finesse. His discerning eye for detail creates literary masterpieces.

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