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Federal Reserve lent $300B in emergency funds to banks in the past week
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Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#22Earlier quoted context omitted.
It’s a loan, not QE. QE is no strings attached money injected into the market. QT is still ongoing as of last week, however, I don’t see it lasting. I do think a .25 rate hike will still happen.
its a 0% loan (edit: 4.68%) at a 100% loan to value ratio, actually at par value not even the current market value, and if the banks don't pay then the fed seizes the collateral this is QE with extra steps
> 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.
more like 5%
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#23This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.
It's deflationary, this comes with strings attached.
That said, it is a harbinger of substantial problems to the system.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#24This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.
Inflation doesn't come from QE it comes from very tight labor markets and monetary policy putting money in the hands of the poorest members of society.
Not if you are talking about asset inflation, housing, etc
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#25Earlier quoted context omitted.
> QE has no impact on inflation This is the most false statement ever. Anything that increases the money supply will increase inflation.
> Anything that increases the money supply will increase inflation. Except we have actual numbers and history to prove that false....
Source? Did we not have rapid asset inflation since QE started in 08? Inflation pops up in all sorts of ways, not just blanket across the board.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#26So here's what I'm confused by. The writing was on the wall a year ago for rapid interest rate hikes. This has well-known and predictable effects on long-term bond holdings.
Why didn't banks liquidate their long-term bond holdings a year ago? I can guess the answer: they wanted to protect executive bonuses and share prices. They hoped they could just stick their heads in the sands and hold those bonds to maturity.
Another question: why even hold their liquidity in long-term bonds that are more sensitive to interest rate changes? Banks could've rolled 90 day Fed debt instead of 10+ year bonds. Again, I can guess the answer: long-term bonds have better yields so the bank can artificially improve its position (ie executive bonuses and share prices again) by adding risk to their depositor funds.
I'm happy to see the solution for poor financial management (eg SVB) is for the bank to be dissolved. Let shareholders bear the cost for poor management.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#27This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.
QE has no impact on inflation because loan origination is not reserve constrained, because banks can always use their government securities as collateral
By the traditional definition of inflation, QE is inflation.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#28Why are we even doing the dance that banks need to keep short term assets on hand to satisfy deposit outflow? Can't they just buy whatever government bonds they want (if the federal government defaults and does not honor its debt there are bigger issues than some regional bank) and give them to the Fed in exchange for freshly minted money? It's the end result in either case, but a lot of uncertainty and friction is a…
Banks lend money to the US government so that a different branch of government can loan the money again to the banks? The whole thing sounds like a charade
wait until you realize that the deposits that first republic received last week came from the big 4 banks... which were flush from cash they received from transfers from smaller banks like first republic.
we are living in financial clownworld now.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#29This is another QE/Quantitative Easing, even if they don't call it that way. I hope inflation doesn't come back/get higher again because then we'd likely see the kind of second wave inflation people saw in the 70s.
Agree it's QE. For those that say this isn't QE, it's understandable given the "original sin of QE" as Ricardo Reis put it: https://twitter.com/R2Rsquared/status/1576164361898708998?t=... (this episode is QE type 3 in his taxonomy)
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#30Id be curious to know how much physical currency has been withdrawn and if there are pressures on that. Inter-bank deposits are covered for people fleeing bad banks, but anecdotally I know a few people who are withdrawing all their hard cash. I wonder if central banks will have issues with that soon.
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