The Federal Reserve Just Made an Emergency Decision Which Will Fundamentally Change Banking in America Forever

 

Did you think the Federal Reserve was just going to stand by and watch the U.S. banking system completely collapse?  In response to the stunning failures of Silicon Valley Bank and Signature Bank, the Federal Reserve announced a rescue plan on Sunday evening that is going to radically change banking in America forever.  All deposits at Silicon Valley Bank and Signature Bank will be fully guaranteed and will be available on Monday.  Of course the Federal Reserve can’t just make an exception for these two banks.  If they are going to do this for them, that means that they are going to have to do it for everyone else too.  So what this means is that from this point forward the Federal Reserve is essentially promising to guarantee every bank account in America.  Considering the fact that more than 19 trillion dollars is deposited with U.S. banks, that is quite a promise to make.

The following is the announcement about this new plan which was just posted on the official website of the Federal Reserve…

To support American businesses and households, the Federal Reserve Board on Sunday announced 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. This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. 

 

The Federal Reserve is prepared to address any liquidity pressures that may arise.The additional funding will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.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.After receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, Treasury Secretary Yellen, after consultation with the President, approved actions to enable the FDIC to complete its resolutions of Silicon Valley Bank and Signature Bank in a manner that fully protects all depositors, both insured and uninsured. These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.The Board is carefully monitoring developments in financial markets. The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.

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