The Ghost of Financial Collapse Past has knocked again. The sin of Wall Street and the City of London after the 2008 crash—refusing LaRouche’s Glass-Steagall and New Bretton Woods, insisting on floating exchange rates, subsidizing through the central banks all forms of financial speculation—has come back to haunt them again as it did in September 2019, and will again soon. Three U.S.-based banks “worth” $400 billion in assets have failed in four days; another, First Republic Bank in California, is teetering; and again Credit Suisse is making the Tower of Pisa look perpendicular by comparison. Trans-Atlantic interbank lending is again “under stress” on Monday according to a worried wire from Reuters, and credit default swaps on banks’ bonds are getting more expensive.
While the U.S. Treasury and the Federal Deposit Insurance Corp. took one action on the afternoon of Sunday, March 12 which is plainly against U.S. law (see separate report), the Federal Reserve took another which attempts, yet again, to fix with money-printing liquidity, what the Fed destroys with its interest rate policies.
That was, to quote the Fed’s Sunday evening announcement “a 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.” Of note, “These assets will be valued at par,” not at their reduced market value in an environment of sharply increased interest rates. “The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”
This fund for liquidity loans will have “up to $25 billion from the Exchange Stabilization Fund [from the Treasury] as a backstop for the BTFP.”
