Fed lent US$300B in emergency funds to banks in the past week
CTV
Cash-short banks have borrowed about US$300 billion from the Federal Reserve in the past week, the central bank announced Thursday.
Cash-short banks have borrowed about US$300 billion from the Federal Reserve in the past week, the central bank announced Thursday.
Nearly half the money -- US$143 billion -- went to holding companies for two major banks that failed over the past week, Silicon Valley Bank and Signature Bank, triggering widespread alarm in financial markets. The Fed did not identify the banks that received the other half of the funding or say how many of them did so.
The holding companies for the two failed banks were set up by the Federal Deposit Insurance Corporation, which has taken over both banks. The money they borrowed was used to pay their uninsured depositors, with bonds owned by both banks posted as collateral. The FDIC has guaranteed the repayment of the loans, the Fed said.
The figures provide a first glimpse of the scale of the Fed's assistance to the financial sector after the two banks collapsed this past weekend.
The rest of the money was borrowed by banks seeking to raise cash -- likely, at least in part, to pay off depositors who tried to withdraw their money. Many mega banks, such as Bank of America, have reported receiving inflows of funds from smaller banks since the bank failures last weekend.
An additional US$153 billion in borrowing from the Fed over the past week came through a longstanding program called the "discount window"; it amounted to a record level for that program. Banks can borrow from the discount window for up to 90 days. Typically in a given week, only about US$4 billion to US$5 billion is borrowed through this program.
The Fed has lent an additional US$11.9 billion from a new lending facility it announced on Sunday. The new program enables banks to raise cash and pay any depositors who withdraw money.
