Fed loans, account guarantees helped stabilize ‘deposit flows’ at regional banks, Treasury official says

WASHINGTON — Record number of emergency loans for banks this week Federal Reserve is key to stabilizing withdrawals from U.S. small and medium-sized banks, Undersecretary of the Treasury Wally Adeyemo told CNBC on Friday.

The impact of swift actions by federal regulators late last week to stabilize the US banking system helped avert the fallout but ripples are still in the economy nearly a week later.

Markets are still undervalued in federal aid or 30 billion USD 11 banks deposit money in Bank of the First Republic to help strengthen trust in the system, he said.

“It will take time for the market to catch up with the actions that we and these banks have taken,” Adeyemo said on CNBC.Dancing on the street.” “And what we’ve done now is give these organizations time to think about how they’ll organize their business going forward.”

Following the collapse of California-based Silicon Valley Bank and New York-based Signature bank last Friday and Sunday, regulators announced a series of emergency measures to stabilize the country’s banking system.

These include securing customer deposits at two failed banks; create a new fund, the Bank Term Financing Program, to provide short-term loans to banks on generous terms; and relaxed conditions at the Fed’s traditional overnight banking arm, the so-called “discount window”.

Adeyemo says the result of these actions has been a dramatic shift in the fortunes of many banks. That included banks that had foreseen the possibility of mass withdrawals and mortgaged collateral ahead of time in the hope of needing urgent loans.

“While some banks are entering the weekend needing more liquidity, what we have seen throughout the week is that they have to use less and less liquidity,” Adeyemo said. “And now we’ve seen stability in deposits for those institutions.”

But while trends are moving in the right direction, the amount of money banks borrowed in the past week through Wednesday from the Fed’s discount window has set a new record at $153 billion, according to the Fed report. weekly report.

The previous record for discounted term loans was $111 billion, set at the height of the 2008 financial crisis.

The identities of the banks that have borrowed will not be made public for another two years. But the totals suggest that the banking sector remains volatile.

Ongoing questions about bank stability align with another that has arisen from the Fed’s actions. Whether uninsured deposits at future failed banks are insured the same way as at SVB and Signature.

“Are all uninsured depositors in the US banking system protected now?” CNBC’s Sara Eisen asked Adeyemo.

The answer is that, for now, this is a goal of the Biden administration, but not a reality.

“Ultimately, the president has made it clear our goal is to protect depositors to ensure that they have the funds they need to run their businesses and make sure their families are taken care of,” Adeyemo said. .