Recent developments in the Federal Reserve’s Bank Term Funding Program (BTFP) suggest that the United States might be facing an underlying banking crisis. Over the past two months, the balance in the BTFP has experienced a significant surge, with the pace of borrowing showing an upward trend.
Since November 19, outstanding loans in the BTFP have increased by a staggering $27.3 billion. In just the last week, the balance in the bailout program grew by nearly $5.4 billion. As of January 3, the BTFP’s balance stood at over $141.2 billion, marking the highest level since the program’s inception in March.
The Thrill Is Gone? Large Bank Loan Volumes Continue To Shrink Despite Deposit Growth (M2 Money Growth NEGATIVE For All Last Year!). Despite deposit growth in the banking sector, total bank deposits rose by $24.2 billion in the week ending on December 27, 2023, on a seasonally-adjusted basis. However, this comes after losing over a trillion dollars in deposits in 2023, and emergency funding facility usage reaching a record high. As Jackson Browne aptly put it, the U.S. economy seems to be “running on empty.”
Adding to the concerns is the negative M2 Money growth, persisting for the entire last year. Despite the third and largest round of fiscal stimulus in March 2021, concerns about the economy’s trajectory are intensifying.
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