After the 2008 financial crisis Americans were told that a law passed by Congress expanding federal authority over the financial industry and creating an all-powerful new federal agency — the Consumer Financial Protection Board — that we’d never have another problem.
This week saw a record-breaking spike in bank borrowing from the US Federal Reserve, with a total of $153 billion borrowed. This surpasses the previous peak during the 2008 financial crisis, and highlights the urgency of banks’ need for liquidity. The unprecedented borrowing was made through the Fed’s discount window, which provides 90-day loans to banks at the current policy rate of 4.75 percent, which has risen steeply over the past year.
The sharp increase in borrowing can be attributed to the recent failures of Silicon Valley Bank and Signature Bank. This has fueled concerns that a wider banking crisis could impact smaller and mid-sized US banks, the UK’s Daily Mail has reported.
The recipients of the funding provided by the Fed were not disclosed, and the number of banks that applied for the loans was not specified. Banks can access primary credit through the Fed’s discount window, and are allowed to provide a diverse range of assets as collateral, such as loan portfolios, as well as long-term securities like Treasuries and mortgage-backed securities, the outlet’s report continued.
Fed to inject up to $2 TRILLION into collapsing US banking system
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