It’s official: Federal Reserve Board announces the Bank Term Funding Program (BTFP) will cease making new loans as scheduled on March 11. The program is confirmed to expire but usage continues to rapidly pick up speed!

Source: www.federalreserve.gov/newsevents/pressreleases/monetary20240124a.htm

TLDRS:

• The Federal Reserve Board announces the Bank Term Funding Program (BTFP) will cease making new loans as scheduled on March 11

• This past week, total outstanding amount of all advances from the liquidity fairy under the Bank Term Funding Program was $161,501,000,000

• As of 10/31/23 total outstanding amount of all advances from the liquidity fairy under the Bank Term Funding Program was $120,605,902,000.

  • Over $3,132,539,000 in interest to survive another day…(so far…)

• Borrowing from the liquidity fairy via BTFP continues to make up for a shrinking M2 and dwindling commercial deposits.

• How did all these banks pass those ‘Stress tests’ needing all this liquidity?!?!….

• “The updated guidance encourages depository institutions to incorporate the discount window as part of their contingency funding plans.”

  • The liquidity fairy is now ENCOURAGED?

• The FDIC noticed that some banks aren’t correctly reporting the amount of deposits they have that aren’t covered by federal insurance. Some banks mistakenly think that if a deposit is backed by assets (like collateral), it doesn’t need to be reported as uninsured.

  • This isn’t right! The deposit’s status doesn’t change just because it has collateral.

  • When banks incorrectly report uninsured deposits, it could create a perception in the market that these banks are more stable than they actually are.

  • Banks that incorrectly report uninsured deposits might face liquidity challenges in extreme circumstances, where depositors simultaneously demand their funds.

• Reminder, while banks have the liquidity fairy, ‘we’ get left in the cold, and Atlanta Fed President Raphael Bostic yet again enrichens himself inappropriately from his position.

• To fix one end of their mandate (price stability) from the inflation problem they created, the Fed will continue sacrificing employment (the other end of their mandate) to bolster price stability by continuing to raise interest rates–causing further stress to businesses and households.

• I believe inflation is the match that has been lit that will light the fuse of our rocket.