Though it is not being labeled as such, large capitol injections such this are known as “quantitative easing,” or simply just a large bailout, is being deployed. This is what happened in the fallout of the Panic of ’08 after the markets all began to freefall and the Feds came in to pump humongous-sized amounts of injections to free up the credit markets from locking up.
While the exact number is still not quite not known at the moment, analysts from JPMorgan Chase & Co. believe this bailout will be roughly $2 trillion, according to a report by Bloomberg. The U.S. banking system purportedly has reserves of approximately $3 trillion, with the large bulk of that held by the megabanks, and it will be the smaller and regional banks that are most likely to take advantage of this new liquidity pump.
The usage of the Fed’s Bank Term Funding Program is likely to be big. The largest banks are unlikely to tap the program, the maximum usage envisaged for the facility is close to $2 trillion, which is the par amount of bonds held by U.S. banks outside the five biggest.
The analysts wrote in a note
In an interview with Marketplace, Joseph Wang, chief investment officer at Monetary Macro, said:
This is basically the biggest bailout to the banking sector [since the financial crisis of 2008–09].
In central banking, one of the basic tenets is you lend to solvent banks with good collateral at above-market rates because the role of a central bank, as we understand, is to be a lender of last resort.
But that [new] bank facility, it breaks all those tenets.
I think there is a moral hazard aspect to this.
He said – as a “moral hazard” infers that since the public is to be reassured that they will be made safe, that this will lend towards the incentivization again.
These fund would come from the recently established Bank Term Funding Program (BTFP), according to Market Beat.
The WinePress noted this announcement this past Sunday when the Federal Reserve, the FDIC, and Treasurer and former Federal Reserve Chair Janet Yellen made an emergency statement in the wake of the Silicon Valley Bank crash – the same day they also announced the FDIC would be taking over Signature Bank as well. When this announcement was made, The WP noted that this signaled that massive capitol injections were coming.
The Federal Reserve Chair Jerome Powell wrote in a statement on Sunday:
To support American businesses and households, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.
The Federal Reserve is prepared to address any liquidity pressures that may arise.
The additional funding will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.
With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds.
After receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, Treasury Secretary Yellen, after consultation with the President, approved actions to enable the FDIC to complete its resolutions of Silicon Valley Bank and Signature Bank in a manner that fully protects all depositors, both insured and uninsured. These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.
The Board is carefully monitoring developments in financial markets. The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.
Depository institutions may obtain liquidity against a wide range of collateral through the discount window, which remains open and available. In addition, the discount window will apply the same margins used for the securities eligible for the BTFP, further increasing lendable value at the window.
The Board is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.
AUTHOR COMMENTARY
The rich ruleth over the poor, and the borrower is servant to the lender.
Proverbs 22:7
And yet this morning U.S. Treasurer [grannie] Yellen told the Senate that everything is peachy and the banking system is “sound.”
I can reassure members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them.
This week’s actions demonstrate our resolute commitment to ensure that our financial system remains strong and that depositors’ savings remain safe.
She told the Senate Committee
She says this while estimates of $2T are about to pumped into the economy! But this is typical for grannie Yellen, who continues to speak softly that everything is rosy. Whenever she does this it means that things are a whole lost worse than what she is willing to let on. She is a former Fed Chair herself: she is no fool, she is quite privy to what is going on. This is the same crook who told the gullible masses that inflation was “transitory,” and took over a whole year to “apologize” on CNN for getting it wrong.
Make no mistake about what is going on – I have been saying from the get-go and for a longtime that the economy is broken beyond repair, both in the U.S. and the Western nations, plus its other allies spread throughout. It was coming apart in 2019 (most are blind to this), but 2020 reset the table and made the situation so insanely worse that words cannot describe the crash that looms.
A poor man that oppresseth the poor is like a sweeping rain which leaveth no food.
Proverbs 28:3
The media is trying to pave over this, but faithful readers of The WinePress should have known and be prudent to the fact that the system is coming apart. We knew it was going to start happening and this banking instability is just a piece of that, and a sign of only worse things things to come. But, this is why you have been smart and frugal with your money, paying off debts, and storing up on extra supplies of food, water, clothing, ammo, ways to stay warm and make fire, filtration, extra fuel, and so forth.
[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).
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BTFP – “it will be the smaller and regional banks that are most likely to take advantage of this new liquidity pump”.
Well, let’s hope they don’t. I am positive that any loan term of one year or less is a trap. These banks must put up assets as collateral which will end up with the Federal Reserve and no telling what kind of strings are attached to these loans. The Consumer Financial Protection Bureau (CFPB) is an independent agency under the Federal Reserve System and I am sure it will be writing those strings. It is a take over of the banking institutions.