Cash-short banks have borrowed about $300 billion from the Federal Reserve in the past week, the central bank announced Thursday.
Security guards let individuals enter the Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. The federal government intervened Sunday to secure funds for depositors to withdraw from Silicon Valley Bank after the banks collapse. Dozens of individuals waited in line outside the bank to withdraw funds. –
The holding companies for the two failed banks were set up by the Federal Deposit Insurance Corporation, which has taken over both banks. The money they borrowed was used to pay their uninsured depositors, with bonds owned by both banks posted as collateral. The FDIC has guaranteed the repayment of the loans, the Fed said.
The rest of the money was borrowed by banks seeking to raise cash — likely, at least in part, to pay off depositors who tried to withdraw their money. Many mega banks, such as Bank of America, have reported receiving inflows of funds from smaller banks sinceAn additional $153 billion in borrowing from the Fed over the past week came through a longstanding program called the “discount window"; it amounted to a record level for that program.
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