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The United States Federal Reserve loaned US$300,000 million in emergency funds to avert a banking crisis

The bankruptcy of two banks in the US has raised doubts about the integrity of the system (Reuters/Andrew Kelly)

Cash-strapped banks have borrowed 300,000 million Dollars to the Fed last week, the Fed announced Thursday.

Almost half the money143,000 million dollars – went to holding companies of two large banks that went bankrupt last week, Silicon Valley Bank and Signature Bankand unleash the widespread alarm in the financial markets. The Fed did not identify which banks received the other half of the financing or say how much.

The holding companies for the two failed banks were set up by the Federal Deposit Insurance Corporation, which acquired both banks. The money they borrowed has been used payment of uninsured depositors, The bonds owned by both banks deposited as collateral. The Federal Deposit Insurance Corporation guaranteed the repayment of the loans, according to the Federal Reserve.

Federal Reserve Chairman Jerome Powell (Reuters/Kevin LaMarque)

The numbers provide an initial idea The amount of aid provided by the Federal Reserve To the financial sector after the bankruptcy of the two banks at the end of last week.

The rest of the money was borrowed by banks for liquidity, perhaps, at least in part, to repay depositors who tried to withdraw their money. Several large banks, such as Bank of America, have reported an influx of money from smaller banks since the banks failed last weekend.

others 153,000 million The Fed’s dollar loans were taken out over the past week through an old program called the “Discount Window,” which was a level register for this program. Banks can borrow in the discount window for up to 90 days. Generally, only between $4,000 and $5,000 million per week is loaned through this program.

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The Fed has lent further 11.900 million dollars from the new lending facility announced Sunday. The new program allows banks to get cash and pay depositors who withdraw money.

The Fed’s emergency loans last week aimed to address one of the main causes of the two banks’ collapse: Silicon Valley and Signature held billions of dollars in Treasury and other seemingly safe bonds that paid low interest rates. .

Over the past year, as the Federal Reserve has steadily raised its benchmark interest rate, yields on long-term Treasury notes and other bonds have soared. AndThis, in turn, drove down the value of lower-yielding Treasury securities held by banks.

As a result, the banks could not raise enough cash selling their Treasury securities to pay the many depositors who were trying to withdraw their money from the banks. It was a classic bank run.

The Fed’s lending programs, particularly the new mechanism it unveiled Sunday, allow financial institutions to offer bonds as collateral and borrow them, rather than having to sell them.

For the new lending line, the Fed said it has received 15.900 million Of the dollars in guarantees, more than 11,900 million that she lent. Banks sometimes provide guarantees to the Federal Reserve before granting loans. This indicates that more lending is underway.

(with information from the AP)

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