US Banking Industry Faces Fragility as Federal Reserve Lends Record $164.8 Billion

03/17/2023 21:48 • Metaverse Matters • 81 views

It is reported that in the recent week, the US banking industry has borrowed a total of $164.8 billion from the Federal Reserve through two credit facility instruments, highlighting the increasing tension in funding after the collapse of banks in Silicon Valley. According to data released by the Federal Reserve, the amount of funds lent by the Federal Reserve through the discount window reached a record $152.85 billion in the week ended March 15, up from $4.58 billion in the previous week. The last record high was $111 billion set during the 2008 financial crisis. The data also shows that the Bank Term Funding Program launched by the Federal Reserve on Sunday lent a total of $11.9 billion. From these figures, it can be seen that the US banking system is still fragile and has not yet fully emerged from the plight of deposit funds moving after the collapse of Silicon Valley banks and Signature Bank. The balance of other loans for the week totaled $142.8 billion, reflecting loans provided by the Federal Deposit Insurance Corporation to Silicon Valley Bank and the bridge bank of Signature Bank.

The Federal Reserve’s discount window borrowing soared, exceeding the total amount during the 2008 financial crisis

Analysis based on this information:

The US banking industry’s recent borrowing of $164.8 billion from the Federal Reserve highlights the increasing tension in funding for the industry, which has been worsened by the collapse of banks in Silicon Valley. The data from the Federal Reserve indicates that the amount of funds lent through the discount window reached a record of $152.85 billion in the week ended March 15, which is the highest level since the 2008 financial crisis.

The Bank Term Funding Program also lent a total of $11.9 billion. These figures reveal that the US banking system is still fragile and struggling to recover from the impact of deposit funds moving away after the collapse of Silicon Valley banks and Signature Bank.

The high amount of lending shows that the banking industry is not yet stable enough to sustain itself without external support. The loans provided by the Federal Deposit Insurance Corporation to Silicon Valley Bank and the bridge bank of Signature Bank reflect the ongoing efforts to support the industry’s recovery.

The Federal Reserve’s lending signals the growing challenges faced by the banking industry, which is grappling with declining profitability, low interest rates, and ongoing market volatility. The impact of the COVID-19 pandemic has further worsened the situation, leading to increased borrowing for survival.

In conclusion, the recent borrowing of $164.8 billion by the US banking industry is a clear indication of its fragility and dependence on external support from the Federal Reserve. The continued lending also reflects ongoing efforts to stabilize the industry after the collapse of banks in Silicon Valley. The industry must work towards long-term stability to ensure its survival and growth in the future.

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