🚨 Banks are borrowing from the Fed at historic levels approaching the 2008 financial crisis. 🚨 Here's a thread on what's happening 🧵:
In the past week, banks borrowed $110.3 billion from the primary lending window, highlighting how they have been bracing for potential runs on deposits in the aftermath of #SVB and #SignatureBank collapses.
As a result, the Fed's total assets have expanded to $8.78 trillion (more than double the $4.1 trillion reported in Feb 2020), signifying a reversal of its long effort to reduce the size of its balance sheet.
These loans are unlikely to create new credit for the economy, as they must be paid back within a year.
The rise in borrowing comes alongside the Fed raising interest rates, by another 0.25% just this week, highlighting the challenge it faces in supporting lenders while bringing down inflation.
The Fed's present predicament is a result of the scale of its past quantitative easing, where banks bulked up their deposit bases as money flowed into the financial system but didn't cut back after the Fed began scaling back its balance sheet.
Fed Chairman Powell said that the expansion of the balance sheet is temporary and not intended to directly alter the monetary policy stance.
What do you think? Are we approaching another 2008 crash or will the system pull through this time? Share your thoughts 👇
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