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Michael S. Darby
NEW YORK (Reuters) – The U.S. Federal Reserve’s emergency lending to banks hit a record level last week, but last week fell amid continued massive lending to the financial system. is still at a high level.
The Federal Reserve said discount window borrowing, the main source of emergency lending to depository institutions, had fallen to $110.2 billion as of Wednesday from $152.9 billion reported last week. Last week he surged from $4.6 billion on March 8, beating his $112 billion record set in the fall of 2008 at the most dangerous phase of the global financial crisis. I was.
But as of Wednesday, banks had increased their borrowings to $53.7 billion under the central bank’s newly launched Bank Term Funding Program. In its first outing last week, the facility pulled out $11.9 billion in loans, less than expected. This facility allows eligible financial firms to borrow a variety of bonds without the penalties normally imposed on this type of credit.
The Fed also reported that lending to foreign central banks via its repo facility rose from zero on March 15 to $60 billion on Wednesday. Several major central banks have recently announced that they will use Fed dollar liquidity when needed.
Borrowing from the Fed pushed the overall balance sheet size to $8.8 trillion from $8.7 trillion last week.
Last week’s gains set back the Fed’s efforts to cut its cash and bond stockpiles, which reached just under $9 trillion over the summer since last summer.
The $142.8 billion in credit the Fed provided to the Federal Deposit Insurance Corporation to deal with failed California banks climbed further to $179.8 billion, according to Fed data.
Banks want Fed cash
Emergency lending to banks has surged following the collapse of two California banks, fueling concerns about widespread stress in the financial system. This is partly due to the pace of aggressive credit tightening by the Federal Reserve (Fed) in an attempt to bring down high interest rates. level of inflation.
The Fed proceeded to raise rates on Wednesday, pushing short-term borrowing costs up by a quarter of a percentage point. The Fed also signaled that rate hikes are all but complete, acknowledging that tight financial conditions are likely to weigh on the economy as the banking sector struggles and the market reacts.
US Federal Reserve (Fed) Chairman Jerome Powell said after the Fed’s meeting that the current bank troubles are not a repeat of what happened in 2008. ‘, he said at a central bank press conference.
Justifying central banks’ swift action, Powell said, “History shows that failure to address the problem of isolated banks undermines confidence in sound banks and threatens the ability of the banking system as a whole. It may be possible,” he said.
Fed Chairman Powell’s declaration of confidence in the financial system has sparked an influx of money into money market funds. But analysts at investment bank Barclays added a cautionary note, saying in a note on Wednesday, “These recent flows appear to be driven by interest rates, not fear.”
Data from the New York Federal Reserve also provided further insight into money market flows. Bank reserve repo facilities, which allow banks to hold cash at the central bank, generally offer a higher return than is available in the private sector, and have already accelerated heavy usage in recent days. Inflows moved toward a record of $2.554 trillion set on Jan. 3 and reached $2.233 billion on Thursday after several days of increased usage. (Reporting by Michael S. Derby; Editing by Daniel Wallis)
