by Steve Cannon for USSA News.
As the ongoing banking crisis unfolds, financial institutions have turned to the US Federal Reserve, borrowing a staggering $153 billion, marking a 3,000% increase from the previous week. This surpasses the borrowing levels during the 2008 financial crisis and underscores the urgency of banks’ need for liquidity.
The massive surge in borrowing can be linked to the recent collapse of Silicon Valley Bank and Signature Bank, raising concerns about a more extensive banking crisis affecting smaller and mid-sized US banks. Moody’s analysts noted that this significant increase in emergency borrowing from the Fed’s discount window indicates credit-negative strain on bank funding and aligns with Moody’s negative outlook on the US banking system.
While the recipients of the funding and the number of banks applying for the loans were not disclosed, the banks can access primary credit through the Fed’s discount window. They are permitted to offer various assets as collateral, including loan portfolios and long-term securities like Treasuries and mortgage-backed securities.
The Fed reported that short-term loans through the discount window reached $4.58 billion as of March 8, consistent with recent patterns. However, following the failure of Silicon Valley Bank and Signature Bank, this figure soared to $152.85 billion within a week, breaking the previous record of $110.7 billion set in late October 2008.
It is important to note that these figures do not include the $143 billion in loans the Fed provided to the holding companies of Silicon Valley Bank and Signature Bank to secure their uninsured deposits. The Federal Deposit Insurance Corporation (FDIC) established the holding companies after taking control of their assets and operations.read more