The Fed's Bank Term Funding Program (BTFP), the facility that they introduced after the March 2023 banking crisis, now offers lower borrowing rates than the Fed pays in interest on reserve balances.
So, banks are arbitraging this by borrowing from the facility (i.e. from the Fed) at one interest rate, and then depositing that borrowed money with the Fed to earn a higher interest rate, and thus are earning that risk-free spread. They're arbitraging the Fed.
Funny-money. And the Fed can't run out of money so they just let it happen.
They borrow against depreciated collateral at par, so this is doubly bad. 😬
Seems kinda like a...PONZI...
Anyone can explain me how that makes sense and why would anyone with access to it not max it out to maximize the spread?
Whenever they do something stupid like this it is to avert systemic failure.
The entire current system is a tangled ball of arbitrage and carry trades.
That’s the problem in a nutshell.
How does the BTFP rate get set? This seems like such an obvious thing the FED would (should? Could?) correct quickly. Still pretty unbelievable it’s even possible
Anything is possible with clown money.🤡
End of fiat regime vibes
More fiat inflationary games.
I hate the players AND the game.
BTFD > BTFP
Ah, that’s why it went up 20+% rapidly
https://damus.io/note1826a7lzphlxavc4e347n8kmz2lv47gyfecamsm4l0sj8qpkmwv3qjwsxta
But they have to have collateral to do it
So in essence the Fed has created a pump to suck up Treasuries (ie monetize the debt ie inflate)
Don’t BTFD on BTFP
pure clownery 🤡
Just a more opaque and hidden way for the Fed to give the banks money to bail them out
nostr:note1sclrfa89ymxf434q8nffh6jee7zwqkemq5tpcqucw9s0fc2kl7nqcdy0es "We got hosed, Tommy. We got hosed."
Is the Fed intentionally trying to lose money? Do you think this is a strategy to keep the US Treasury from getting those Fed "profits" checks they had been getting prior to the interest rate hikes?
This is ... nvm, I don't even know what to say
It's funny how the Bank Funding Term Program got renamed to the Bank Term Funding Program when the wizards realized that it was too easy to use the acronym synonymously with Butt Fuck The People.
I'm sure they will offer this opportunity to the little guy too! 🤣
Sick 🤡
Ponzi playing the Ponzi
This creaking system somehow keeps going. It's clear to most, even those outside finance, that it's going to break down at some point, but I absolutely cannot believe how long it continues. I guess I shouldn't be surprised, given how long Japan has been going. Complacent population can allow the game to run into true absurdity.
Interesting observation about the banks arbitraging the difference between the BTFP and interest on reserves. Do you think this was an intentional move by the Fed to encourage more lending by making it advantageous for banks to borrow from this facility? Or was it an unintended consequence that the Fed may need to address?
I ain’t even mad. Not bad
