Federal Reserve’s $103B Banking Bailouts Hit Another High

Key Points:

• The Fed’s Bank Term Funding Program (BTFP) has reached a record $103.08 billion in loans for the week ending June 28.
• The milestone figure means that the Fed is still bailing out banks despite its attempts to reassure investors that the banking crisis is over.
• Market analyst Joe Consorti claimed that the “Fed’s shadow liquidity is propping up risk-taking behavior across markets,” which may encourage investors to take larger risks.

Fed’s Bank Term Funding Program (BTFP) was created in March of this year during the United States banking crisis, which led to the collapse of Silicon Valley Bank and other depository firms.

The aim of the program is to backstop banks and other depository firms during the crisis. The Federal Reserve Bank of St. Louis has released data showing that the Fed’s Bank Term Funding Program (BTFP) has reached a record level of $103.08 billion in loans for the week ending June 28. This is the highest level of distressed asset redemptions since the program was introduced three months ago. Despite the Fed’s attempts to reassure investors that the banking crisis is over, the milestone figure shows that the Fed is still bailing out banks.

Market analyst Joe Consorti has also commented on the latest figures, suggesting that the “BTFP’s shadow liquidity is propping up risk-taking behavior across markets.” As a result of this, investors may be encouraged to take larger risks, as evidenced by the increases in stock markets such as the S&P 500. Consorti believes that the BTFP will have to create a new facility to buy distressed commercial real estate loans and even commercial mortgage-backed securities.

U.S. banking regulators have been asking lenders to work with credit-worthy borrowers that are facing stress as commercial real estate lending remains under pressure. In addition, the BTFP peak has come in the same week that the Federal Reserve announced its banking stress test results, passing the top 23 lenders in the country. It is unclear what further action the Fed will take regarding the ongoing banking crisis, but the record level of loans for the week ending June 28 is a clear indication that the program is still in high demand among embattled banks.

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