Fed Auctions $50b; Banks Wanted $92b
The Federal Reserve reported that its March 10 Term Auction Facility Auction resulted in $50 billion in loans at a rate of 2.80%.
Importantly, the bid-to-cover ratio was 1.85, meaning that there was nearly a two-to-one ratio of requests for funding to actual loans. 82 banks participated, and there is no way to know what banks were involved.
Recent history shows that these funds will go toward shoring up the balance sheets of banks in trouble, rather than being passed on to consumers and businesses originating new loans. Banks’ balance sheets are starting to look like a black hole of bad paper, and there’s no telling how large that black hole is. We can be reasonably sure it’s larger than $92 billion, though.