The Federal Reserve has released data indicating
that emergency lending to banks has remained
high and even increased modestly in the latest
week, reaching $316.5 billion as of Wednesday.
This represents an increase from the $312 billion
recorded on April 12. The rise in borrowing can
be attributed to the failures of Silicon Valley
Bank and Signature Bank in March, which
triggered fears of greater stress within the
banking sector.
The Fed's discount window lending facility
extended $69.9 billion as of Wednesday, up from
$67.6 billion on April 12. The Bank Term Funding
Program, which was specifically set up last
month to deal with banking sector problems,
rose to $74 billion from $71.8 billion the previous
week. Meanwhile, the "other credit" tied to the
Federal Deposit Insurance Corporation's work to
wind down failed banks remained steady at
$172.6 billion on Wednesday.
It is important to note that the overall sum of
emergency lending is still very high, far
surpassing levels seen during the peak of the
financial crisis. However, it has been easing over
recent weeks after hitting a peak of $343.7
billion on March 22.
Despite the high levels of emergency lending, the
Fed has emphasized that the banking system is
sound and resilient. Fed officials have indicated
that they see the troubles that have led to the
surge in emergency lending as limited to a few
institutions. They have stated that there is no
reason to be worried about the ongoing high
levels of emergency lending.
It is worth noting that the discount window,
the Fed's main lender of last resort tool,
historically has been shunned by banks for fear it
would send out a sign of weakness to use it. The
Fed has sought to erase that stigma and
encourage use when needed. Fed officials have
stressed that it is not a bad thing for banks to
use the discount window when they need
liquidity. The discount window is viewed as an
important part of the Fed's toolkit, and Fed
officials hope that it will not be stigmatized again
by dissuading people from using it.
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