{"id":159855,"date":"2023-03-14T12:05:00","date_gmt":"2023-03-14T16:05:00","guid":{"rendered":"http:\/\/stateofthenation.co\/?p=159855"},"modified":"2023-03-14T13:33:10","modified_gmt":"2023-03-14T17:33:10","slug":"the-federal-reserve-just-made-an-emergency-decision-which-will-fundamentally-change-banking-in-america-forever","status":"publish","type":"post","link":"http:\/\/stateofthenation.co\/?p=159855","title":{"rendered":"

The Federal Reserve Just Made An Emergency Decision Which Will Fundamentally Change Banking In America Forever<\/b><\/h3>"},"content":{"rendered":"

Michael Synder
\nEnd Of The American Dream<\/p>\n

\"\"<\/a>
\nDid you think that the Federal Reserve was just going to stand by and watch the U.S. banking system completely collapse?\u00a0 In response to the stunning failures of Silicon Valley Bank and Signature Bank<\/a>, the Federal Reserve announced a rescue plan on Sunday evening that is going to radically change banking in America forever.\u00a0 All deposits at Silicon Valley Bank and Signature Bank will be fully guaranteed and will be available on Monday.\u00a0 Of course the Federal Reserve can\u2019t just make an exception for these two banks.\u00a0 If they are going to do this for them, that means that they are going to have to do it for everyone else too.\u00a0 So what this means is that from this point forward the Federal Reserve is essentially promising to guarantee every bank account in America.\u00a0 Considering the fact that more than 19 trillion dollars<\/a> is deposited with U.S. banks, that is quite a promise to make.<\/p>\n

I want to show you that I am not exaggerating one bit.\u00a0 The following is the announcement about this new plan that was just posted on the official website of the Federal Reserve<\/a>\u2026<\/p>\n

To support American businesses and households, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.<\/p>\n

The Federal Reserve is prepared to address any liquidity pressures that may arise.<\/p>\n

The additional funding will be made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution\u2019s need to quickly sell those securities in times of stress.<\/p>\n

With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds.<\/p>\n

After receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, Treasury Secretary Yellen, after consultation with the President, approved actions to enable the FDIC to complete its resolutions of Silicon Valley Bank and Signature Bank in a manner that fully protects all depositors, both insured and uninsured. These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.<\/p>\n

The Board is carefully monitoring developments in financial markets. The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.<\/p>\n

Depository institutions may obtain liquidity against a wide range of collateral through the discount window, which remains open and available. In addition, the discount window will apply the same margins used for the securities eligible for the BTFP, further increasing lendable value at the window.<\/p>\n

The Board is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.<\/p><\/blockquote>\n

Please don\u2019t just skim those paragraphs.<\/p>\n

Take the time to read them in detail, because what the Fed just did literally changes everything.<\/p>\n

From now on, nobody will have to worry that their bank will fail, and the Fed has decided to completely end the war against inflation.<\/p>\n

If the technical language confuses you, here is Zero Hedge\u2019s translation<\/a>\u2026<\/p>\n

Translation: the Fed\u2019s hiking cycle is dead and buried, and here comes the next round of massive liquidity injections. It also means that the Fed, Treasury and FDIC have just experienced the most devastating humiliation in recent history \u2013 just 4 days ago Powell was telling Congress he could hike 50bps\u00a0and here we are now using taxpayer funds to bail out banks that have collapsed because they couldn\u2019t even handle 4.75% and somehow the Fed has no idea!<\/strong><\/p><\/blockquote>\n

That analysis is right on the money.<\/p>\n

I warned that our system could not handle higher interest rates, and higher rates were directly related to the collapse of Silicon Valley Bank.<\/p>\n

So there won\u2019t be any more rate hikes.<\/p>\n

In fact, I wouldn\u2019t be surprised at all if the Fed started cutting rates very soon.<\/p>\n

In addition, all of the fresh money that the Fed will be injecting into the financial system now will be highly inflationary.<\/p>\n

We are being told that the Fed\u2019s plan won\u2019t cost taxpayers a dime, but the truth is that inflation is a tax on all of us.<\/p>\n

So the financial community may be praising this \u201cextraordinary intervention\u201d by the Fed, but there will inevitably be a very high price to pay for spraying money around so recklessly.<\/p>\n