Fed Rolls Out Emergency Measures to Prevent Banking Crisis After SVB Collapse

So the Fed is creating a fund to stabilize other banks’ bad bets, great…

>The central bank said it would make additional funding available to banks through a new “Bank Term Funding Program,” which will offer loans of up to one year to banks that pledge U.S. Treasury securities, mortgage-backed securities and other collateral. Up to $25 billion from the Treasury’s exchange-stabilization fund will backstop the Fed lending program.

Many of those securities have fallen in value as the Fed has raised interest rates. The terms would allow banks to borrow at 100 cents on the dollar for securities trading potentially well below that value, potentially putting the government at risk of losses incurred by banks. Critics said the move would essentially offer a backdoor subsidy to bank investors and management for failing to properly manage interest-rate risks.

I don't really want banks to get bailed out for making bad choices, but the details of this feel different than 2008 when it was pure greed and fraud. In this case, a lot of businesses (depositors) that did nothing wrong and were acting in a responsible manner by putting money in the bank for payroll and stuff like that suddenly stand to lose everything. I think protecting those organizations is a good idea.

Economic damage has a huge domino effect- the economy is just a big network of relationships, and those relationships take time to establish and can fall apart instantly.

“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the president, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, Calif., in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”