The Federal Home loan Bank (FHLB) has issued almost twice as much debt as the Fed's two major financing vehicles combined, and one of them, the Fed's discount window, provided $152.85 billion in loans as of last week, a weekly record set during the 2008 financial crisis and well above the $4.58 billion a week earlier.
How tight is the liquidity of US regional banks? If you look at the Federal Housing loan Bank (FHLB), which transfusions for regional banks, you can see that it has recently issued bonds to raise money.
As an important lender to regional banks endorsed by the US government, FHLB was born during the Great Depression in the 1930s with the initial mission of supporting home mortgages and related community investment. Today, FHLB has the nickname of the second-to-last lender of last resort, which shows that FHLB is a lending channel second only to the Federal Reserve in the minds of regional banks.
According to media reports on Monday, March 20, US Eastern time, FHLB issued a total of $304 billion of bonds last week, according to people familiar with the matter. That's almost double the amount that U.S. banks recently borrowed from the Fed's two financing vehicles totaling nearly $165 billion. According to people familiar with the matter, last week alone, FHLB issued $112 billion of bonds, the largest single-day financing in history.
Fed data released last week showed that the Fed lent a total of $152.85 billion through the discount window in the week ended March 15, far exceeding the $4.58 billion the previous week and breaking the weekly record of $111 billion set during the 2008 financial crisis.
In addition, the Fed's financing vehicle Bank regular financing Program (BTFP), which was launched on Sunday, March 10, provides $11.9 billion in loans. Including the discount window, the Fed lent a total of $164.75 billion.
When it announced the launch of BTFP the next day on March 10, the Fed said the tool would ensure that banks with liquidity problems had access to funds to meet the needs of depositors, covering Silicon Valley banks that failed earlier this month and all uninsured deposits at Signature Bank that exceeded $250000.
Media commented that the surge in FHLB bond issuance reflected the strong demand for cash in the US banking sector, as Silicon Valley Bank and other three banks quickly failed due to liquidity constraints, prompting bank customers to withdraw large amounts of deposits.
Joseph Abate, a strategist at Barclays, estimates that FHLB's outstanding loans could now exceed $1.1 trillion. The media believe that this may be a new record set by the FHLB system during the 2008 financial crisis.
Edit / phoebe