Posted on 03/13/2023 5:47:18 AM PDT by EBH
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.
For media inquiries, please email media@frb.gov or call 202-452-2955.
Borrower Eligibility: Any U.S. federally insured depository institution (including a bank, savings association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit (see 12 CFR 201.4(a)) is eligible to borrow under the Program.
Eligible Collateral: Eligible collateral includes any collateral eligible for purchase by the Federal Reserve Banks in open market operations (see 12 CFR 201.108(b)), provided that such collateral was owned by the borrower as of March 12, 2023.
Advance Size: Advances will be limited to the value of eligible collateral pledged by the eligible borrower.
Rate: The rate for term advances will be the one-year overnight index swap rate plus 10 basis points; the rate will be fixed for the term of the advance on the day the advance is made.
Collateral Valuation: The collateral valuation will be par value. Margin will be 100% of par value.
Prepayment: Borrowers may prepay advances (including for purposes of refinancing) at any time without penalty.
Advance Term: Advances will be made available to eligible borrowers for a term of up to one year.
Fees: There are no fees associated with the Program. Credit Protection by the Department of the Treasury: The Department of the Treasury, using the Exchange Stabilization Fund, would provide $25 billion as credit protection to the Federal Reserve Banks in connection with the Program.
Recourse: Advances made under the Program are made with recourse beyond the pledged collateral to the eligible borrower.
Program Duration: Advances can be requested under the Program until at least March 11, 2024.
Now, I am in over my head. This looks to essentially change the terms of everything with the banks.
Seems like a shell game to me.
ping
additional funding = BOHICA!........................
Print more worthless money.
they are going to lend money to the backs and allow them to use their underwater bonds as collateral so they can be held to maturity instead of forced to sell at a loss ...
Start the presses!
Short take: They nationalized every bank in the US last weekend.
Happy New Year.
Live Bank Stocks Price Crash - LIVE Breaking News Coverage (First Republic Bank, Western Alliance & More)
https://rumble.com/v2cxb72-bank-stocks-price-crash-live-breaking-news-coverage-first-republic-bank-wes.html
Privatized Profits, Socialized Losses...What a country!
That’s what I thought. All the banks that were keeping their mouths shut about their position will be coming forward for this...
Hence the bank stocks crashing this morning
Where’s Andy Jackson when you need him?
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”
Bond yields are down sharply this morning and the markets are saying the Fed might raise Fed Funds by 0.25 in March and then start cutting rates by September.
Things look like a mess to me. The Fed didn’t really have it’s back into fighting inflation anyway, this is the pivot to surrender to inflation. Will be interesting to see how the Fed sells this surrender over the next few months. I’m thinking the government will further fake the already fake economy numbers like CPI, employment, GDP.
President Turnip just went on stage.
OK, how’s this.....?
The process implemented was developed following the Lehman failure. The FDIC will provide $$$ to permit the protection of all depositors, even those with more than $250 K deposits.
There will be an auction and the SVB will be sold and accounts taken over by an existing bank. I believe that auction took place yesterday, Sunday but have seen no announcement. The HKSB in England was the successful bidder yesterday for the Brit SVB there. The US Precedent example is Wells Fargo bought the failed Wachovia. The Wachovia branches reopened with a Wells Fargo sign.
The FDIC has funds and can be provided more by the treasury as required. This cost will be repaid to the FDIC over time by payments made by all banks. That is, no taxpayer funds. In essence, the American economy pays the FDIC bill
The process is what I think is happening but am not certain of all the extremely complex details. However, the powers that be know what are doing and are following the pre determined procedure
The key phrase is "These assets will be valued at par."
SVB failed, essentially, because it couldn't meet its depositors' cash withdrawals without selling bonds that had shrunk in value due to rising interest rates. For example, a 2-year bond that sold for $1,000 with an interest rate at 2% in August is now worth about $900 if rates are at 7%.
SVB sold bonds like this example, and booked a $100 loss per bond, to the tune of $1.8 billion.
This Fed program will negate the need to a) sell bonds (at a loss), and b) allow banks to borrow against these bonds at the $1,000 amount vs the depressed $900 amount.
Good ol' government contrived market distortion.
The Federal Reserve is basically just buying U.S. Treasury bills at artificially low interest rates in order to prop up the U.S. economy. The only difference is that it's now buying them from banks that had them on their books, instead of just buying them directly.
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