U.S. banks borrowed a record amount from the Federal Reserve’s discount window over the last week amid heavy deposit withdrawals.
For the week ended Wednesday, banks borrowed an average of $117B per night, up from an average of $32B from the prior week and more than the average of $112B during the 2008 financial crisis.
- Banks also took advantage of the Fed’s new lending program, Bank Term Funding Program (BTFP).
- The BTFP allows banks to take advances from the Fed for up to a year by pledging Treasurys, mortgage-backed bonds, and other debt as collateral.
- The lending program allows banks to pledge their bonds so they can meet customer withdrawals without having to sell their bonds at a loss.
- Silicon Valley Bank had to sell its bonds at a loss to meet customer withdrawal requests.
- According to the FDIC, U.S. banks had about $620B in unrealized losses on securities at the end of 2022.
- According to PitchBook LCD, no companies with investment-grade credit ratings sold new bonds from Mar. 10 through Mar. 17.
- Also, no company has gone public on the NYSE in over two weeks.
