Well this is alarming. Latest reading (Wednesday, March 15): 38% above the 2008 financial crisis max pic.twitter.com/8s1nqifFM5
— Doug Henwood (@DougHenwood) March 17, 2023
First saw this on Twitter
It looks like banks are availing themselves of the Federal Reserve's discount window at rates not seen since the 2008 crash.
The Fed discount window is a lending facility is a way for the central bank to loan money to banks to prop them up.
It should be noted that use of this facility does not indicate that a bank is insolvent, but it does indicate that the bank has some sort of liquidity issues. (I.E., the bank has the money that it needs, but it does not have the money that it needs at hand right now)
What this probably indicates right now is that the banks are concerned about having sufficient ready cash reserves to survive a run, rather than any deeper financial issues, for a while, at least.
Banks across the country turned to the Federal Reserve’s discount window and the Federal Home Loan Bank system over the last week, borrowing the most since 2008 as panic spread among depositors.
Banks borrowed $152.85 billion at the Fed on Wednesday, up from $4.58 billion a week before, according to new data released Thursday. The daily average for borrowing last week was $85 billion, compared with $4.4 billion a week earlier, and the most since the 2008 financial crisis.
Meanwhile, the Federal Home Loan Bank system had its biggest day of issuance ever on Monday, issuing $112 billion worth of debt to fund requests from banks looking to solidify their balance sheets.
………
Banks are generally skittish about using the discount window and especially afraid of it becoming public. The program is known as the industry’s lender of last resort, offering overnight loans that banks can use to ease a liquidity issue. The Fed would reject an insolvent bank from borrowing, but the program has long carried a stigma that to need the discount window is a sign of dire trouble.
Yeah, that whole, "Last resort," bit is so damn reassuring.
Banks tapped the Fed’s new funding program for $11.94 billion on Wednesday. The two banks that failed last week borrowed another $142.8 billion.
This is not going to end well.
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