Fed bails out banks up to $300B

The Federal Reserve (Fed) has expanded its balance sheet by about $300 billion to help banks make loans. So can we expect a return of quantitative easing (QE)?

The Fed announced that banks struggling with a lack of liquidity had borrowed about $300 billion last week. With this bailout, economist Peter Schiff believes that Qi is back. He predicts that inflation is on the rise as the Fed wiped out nearly four months of quantitative tightening (QT) in one week.

Fed saved the banking system with money printing

According to Fortune, the Fed allocated $143 billion to holding companies for failed banks like Signature Bank and Silicon Valley Bank. The holding companies will use the money to make depositors whole.

Then, the Fed lent $148 billion through a program called the “discount window”. The amount is a record-high compared to normal borrowing through the program. According to The Guardian, only $4 to $5 billion is borrowed in a given week through the discount window.

Last Sunday, the Fed inaugurated the Bank Term Funding Program (BTFP) and lent $11.9 billion. This program helps the bank raise funds to meet the needs of all depositors.

What do the experts say?

Overall, the US central bank has aided the banking system by about half the amount during the 2008 crisis. JPMorgan economist Michael Ferroli thinks that’s a huge number. “The glass half-empty view is that banks need a lot of money,” he says. The glass is half full that the system is working as intended.

Nikolaos Panigirtzoglu, a JP Morgan strategist, estimated that the Fed could inject $2 trillion into the US banking system and reverse the QT effect. “Over time, this pushes bitcoin above $50,000, and the bitcoin halving is now about a year away,” Bitbns CEO Gaurav Dahake told BeInCrypto.

Banks have unrealized losses of $ 620 billion

Banks bought government bonds with excess deposits due to QE during the 2020 COVID crisis. But, with interest rates rising, the price of bonds fell, and banks are sitting with huge unrealized losses.

“Banks are holding unrealized losses on their balance sheets totaling $620 billion due to the reduction in the value of their government bond portfolios as interest rates rise,” writes Arthur Hayes, co-founder of the BitMEX exchange.

Banks are in $620 billion in unrealized debt
Source: Medium

Last month, the People’s Bank of China also switched to quantitative easing mode by injecting $92 billion into the market.

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