The Economy

Federal Reserve Board announces 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

March 12, 2023
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.

*****

June 22, 2023


They are just getting started.

This is what they do. ... they announce these radical interventions in our debt markets to stem a crisis they caused in the first place. In 2008 they got pushback. Now, they can do whatever the fuck the want. They minimize it on announcement. It's temporary. In thise case, they really minimized it, because they can't exactly tell people that thousands of banks are insolvent due to interest rate risk that the Fed itself caused. There would be runs on banks. They give it benevolent names like Troubled Asset Relief Program, or in this case, Bank Term Funding Program.

Once they start. ... they just normalize the immoral thing they slipped in there while a brain-dead public doesn't object. ... and they never stop. In this case. ... they are lending money that they are allowed to create out of thin air by fiat to their hand-picked cronies, taking collateral in return that isn't worth anything near the value of the loans they are being given to stave off their failures. We're all on the hook for the immediate losses; because they can inflate away their corruption we will be taxed by devaluation of the dollars we earn and have to use by law in this country.

The facility they introduced is supposed to be for only a year. ... it would be a lifeline for banks to get themselves right. There are only 9 months left now. The problem is that there are 15 years of distortions -- trillions of dollars of really toxic debt -- that require price-fixed zero interest rates to avoid credit defaults, bank failures and economic pain. Banks are not magically getting out of the fact that they were pushed by the Fed to borrow long and lend short because of the safe yield their businesses rely on being robbed of them by Fed "policy." As long as rates stay 500 basis points north of zero (because they felt forced to pretend they are dealing with the inflation they caused). ... they are just propping up failure with the huge balance sheet, which this facility just ADDS TO. It comes at huge costs to all of us that 98 percent don't seem to understand. In 9 months. ... this "no big deal, small lending facility that is growing, will be extended. Just like quantitative easing was going to be relatively small and very temporary. We are $8+ trillion and 15 years into it. The only way it doesn't get extended is if they completely reverse their monetary "policy" and drop the overnight rate way back down, which won't be surprising either. They'll choose runaway inflation over being responsible. They have only one function: to monetize more and more debt (and make the eventual reckoning even worse) to try to put off the consequences of all of their prior debt monetization, then pretend like they are ending the party, only for things to start to break, at which point they act like they had nothing to do with any of it, and step back in to deal with the debt crisis they caused. ... the only way they know how. We are all paying a huge price for it.

 

Of course.

Unfortunately, they aren't the ones driving that car. Sticky consumer price inflation (that they caused) threw a monkey into their wrench.

So the Fed has been stuck trying to look like they are on the case. ... while selling the bullshit that actually doing what needs to be done won't cause a credit event and the loud popping noise that is going to proceed something bad. The whole time they have been half-assing it, the bond market -- which is what really leads them around by their noses -- is saying, "We know you are full of shit, we're not buying that you're serious," and it is fighting them. It's kind of absurd to me, because the mantra is, "Don't fight the Fed." But what that really means is "don't fight the Fed when they are blowing a bubble. Jump in and ride the momentum. But when they are withdrawing liquidity, do fight them. Because they are going to panic and reverse course."

Any number of things can go wrong creating a serious economic event preventing them from getting to the election with just the inadequate tightening they have done. Don't forget, Bear Stearns and Lehman and the great financial crisis happened right before the 2008 election, with them trying to do what you are saying. This time around, they really have backed themselves into a corner. If they back off this time before they cause a serious credit event, the crippling inflation tax they have hit the poorest people with to create their artificiality is what is going to influence the election.

 

Loan defaults, banks with portfolios that are underwater shutting their doors, bankruptcies.

Much worse, though. ... because they use a fractional reserve banking system to execute their manipulation, it creates leverage throughout the economy. Banks get a dollar injected into their reserves by the Fed, they turn around and loan out several dollars. It funds a massive shadow banking system that pushes the envelope. At some point we will learn about more batshit things that have been happening under the surface. Leveraged plays that will go bad. There are undoubtedly leveraged loan schemes out there -- just like in 2008 -- that are going to have the potential to do a lot of damage.