> The Fed also unveiled an emergency lending program that, for the time being, will allow banks to put up the type of collateral that SVB dumped for cash loans that will help them meet withdrawal requests.
I am a bank & I have an asset with a nominal value of $100. Now underwater at $50. Go to the Fed & trade it for $100. Keep buying the underwater asset class but now I can buy assets worth $200 (nominally). Go to the Fed & trade it for $200 cash / equivalents. Go back to markets & buy $400 worth of underwater assets....
biospeculator t1_jcb96ay wrote
Reply to comment by politico in We’re POLITICO econ/finance reporters and a bank regulation expert. Ask us anything about economic politics and policy after Silicon Valley Bank’s shocking collapse. by politico
> The Fed also unveiled an emergency lending program that, for the time being, will allow banks to put up the type of collateral that SVB dumped for cash loans that will help them meet withdrawal requests.
I am a bank & I have an asset with a nominal value of $100. Now underwater at $50. Go to the Fed & trade it for $100. Keep buying the underwater asset class but now I can buy assets worth $200 (nominally). Go to the Fed & trade it for $200 cash / equivalents. Go back to markets & buy $400 worth of underwater assets....