• SVB (Silicon Valley Bank) crises created a $550 billion of deposit withdrawals from small and medium banks creating a credit crunch.
  • The Fed announced the BTFP (Bank Term Funding Program). The Fed provides one year loans to all depository institutions in exchange for treasuries at par value even when market value has declined.
  • To facilitate the program, the BTFP would additionally provide $25 billion in lines of credit from the Treasury to the regional Federal Reserve Banks.
  • This ballooned the balance sheet from the QT (Quantitative Tightening) low of $8.34 trillion March 8th, to $8.73 trillion on March 22nd.
  • QT was paused for 2 weeks but has restarted.
  • Bank run has been curtailed and deposits have stabilized.
  • Fed Balance Sheet has started to shrink again with QT restart and some of the emergency loans being repaid.
  • The credit crunch is just beginning.
  • Banks are tightening lending standards and lending less.
  • Credit crunch will probably push economy into recession.