An emergency lending program the Federal Reserve created during the 2023 banking crisis has turned into easy money, The Wall Street Journal reports.
The rate banks pay to use the Fed’s bank term funding program, or BTFP for short, is tied to future interest-rate expectations. As The Wall Street Journal reports, now that investors have priced in a series of rate cuts later this year, banks are able to pocket the difference between what they pay to borrow the funds and what they can earn from parking the funds at the central bank as overnight deposits.
Lending in the program hit $141.2 billion this past Wednesday, a new high, up 4% from the prior week and up 25% since the middle of November when forecasts started changing. Most of the volume is still loans from the crisis, and the number didn’t move much from July to November.
The Wall Street Journal notes the increases don’t seem to be a sign of new stress on banks, especially since deposits have ticked up at banks over the same period. It appears more likely the banks are just taking the easy money. Read the full story from The Wall Street Journal.
