17/3/2023–|Last updated: 3/17/202312:32 PM (Makkah)
Data from the Federal Reserve (US Central Bank) showed that banks sought to obtain emergency liquidity in record amounts during the past few days in the wake of the collapse of Silicon Valley (Silicon Valley SVB) and Signature, which in turn led to the dissipation of efforts made by the central bank for months. to reduce its budget.
As of Wednesday, banks had received $152.9 billion – an unprecedentedly high amount – from the US central bank’s discount window, a traditional facility that acts as a last resort.
It also obtained $11.9 billion in loans from the US Central Bank’s recently introduced term bank lending program.
Discount window borrowing surpassed the previous record of $112 billion in the fall of 2008 during the worst of the financial crisis.
Although the borrowing amounts are large, some analysts felt comfortable with them, and said that the matter reduces fears that the events witnessed in the past days will escalate to a level that could lead to the collapse of the entire economy.
“The numbers – as we see them here – are more consistent with the idea that this is just an isolated problem with a few banks,” said Thomas Simmons, money market economist at Jefferies investment bank.
He added that the government’s support efforts appear to be working, and that the amount of money disclosed by the “American Central Bank” yesterday, Thursday, indicates that “it is not a huge problem at the system level.”
The increase in emergency lending stopped the contraction of the Federal Reserve budget, and even significantly increased it. After reaching about $9 trillion last summer – before the central bank began taking measures to reduce its holdings of Treasury and mortgage-backed securities – total holdings fell to 8.39. Trillions of dollars on the eighth of March, before it rose to about 8.7 trillion dollars the day before yesterday, Wednesday, which is the highest since last November.