Banks secret door for cheaper cash

[Parklane777]

Something like this i tought so it's good for markets and traders and for financial world.
Banks are pocketing real money by borrowing money from the Fed's newest backstop facility, which charges a lower rate, and then parking it at another unit of the Fed, which pays higher interest.
Banks are borrowing record amounts from this new facility.

Source:
https://www.bloomberg.com/news/articles/2023-12-21/demand-for-fed-s-bank-term-funding-facility-grows-to-record-high?utm_source=website&utm_medium=share&utm_campaign=twitter

[STT]

Theres alot of schemes like that, banking is one of the most subsidized business sectors operated globally.  Its also highly regulated and if you deal dollars they can shut you down anywhere in the world pretty much because of the large centralized influence inherit in this system.  The banks are easy choice to support as an industry as they are primary dealers of Government debt, if the banks cant buy then the government cannot spend.  More then that if the debt sales dont continue of government bonds then the debt must be repaid a budget surplus is a real hard sell come election.  Imagine politics has only its principles to run on not promises of bail outs and debt based overspending, a very hard prospect for anyone to get elected vs the candidate who will do the opposite.
  The problem with a circular relationship of banks supported by government programs who in turn will buy the debt to enable the support is the feedback effect is likely to fail at some point leading to extreme alterations in monetary liquidity.   Inflation switching to deflation and back again is an impossible scenario in an economy to navigate.

[retreat]

If you think the economics of banks are that simple, you are very wrong, the economics of banks are so complex that even imagining it is sickening. But as far as I understand, the banks park their money mostly in securities and loans to their customers, then some in investments, businesses, etc. And because of this, during an economic crisis, many banks will limit their customers from making loans and withdrawing money, because most of their money is somewhere else and when everyone withdraws money from them it means it will disrupt their operations and could cause them to collapse.

[NewRanger]

Something like this i tought so it's good for markets and traders and for financial world.
Banks are pocketing real money by borrowing money from the Fed's newest backstop facility, which charges a lower rate, and then parking it at another unit of the Fed, which pays higher interest.
Banks are borrowing record amounts from this new facility.

So, if they do that, try looking internally first to see whether the strategy is relevant to the vision and mission of central banks in general, which have big tasks such as maintaining financial stability in society.

I'm just keeping it simple and this is nothing but a strategy, you could say, in the end, to generate bank profits at some point. Btw, Apart from having potential benefits as you explained above, this step also creates potential losses which are no less interesting in the normal functioning of financial markets.

[mindrust]

Banks do these types of stuff all the time. It is literally their job to lend money high while borrowing cheap. They do it with us too. They borrow our money for x%, then lend it to somebody else for x+1%. The situation you are talking about is the same thing. Only the customers are different. When there is an opportunity to make money, they will make it unless it's illegal to do so and sometimes even that won’t stop them.

Regular people can trade assets. (Common merchants)

People who own a cash exchange can trade currencies. (Requires a license)

Banks can trade assets, currency and interest. (Requires an expensive license)

[Dump3er]

Something like this i tought so it's good for markets and traders and for financial world.
Banks are pocketing real money by borrowing money from the Fed's newest backstop facility, which charges a lower rate, and then parking it at another unit of the Fed, which pays higher interest.
Banks are borrowing record amounts from this new facility.

So, if they do that, try looking internally first to see whether the strategy is relevant to the vision and mission of central banks in general, which have big tasks such as maintaining financial stability in society.

I'm just keeping it simple and this is nothing but a strategy, you could say, in the end, to generate bank profits at some point. Btw, Apart from having potential benefits as you explained above, this step also creates potential losses which are no less interesting in the normal functioning of financial markets.

While this is supposed to be true, in reality all central bankers can never effectively be protected from lobbyism or external influence driven by personal agendas. People who solely and truly act in the best interest of society as a whole are pretty rare I suppose!

And as it has been mentioned here before, I think some of the schemes banks are using to leverage their own positions or to exploit any loopholes may not even be known to the public or come to light ever, or when it is too late.

[jrrsparkles]

Banks do not need to make money when they can create money and watchHow Banks Create Money.

This isn't about printing money but how they can turn a 10K deposit from someone into 250K in the next few years by lending the same money to 10 other people and charging double/triple the interest rate that they pay you.

[KiaKia]

All of my life I have been robbed by the banks, and it's funny to think about, so many of my people trust their banks just as they trust the government, I don't know about others but bank is the greatest scam known to human, so I am not surprised by any scheme they are playing, I just pity people that believe so much that their money should always be in their bank account.

I will never take loan from the bank nor will I ever borrow money from the bank, it's like filling up their pockets, working hard to get them richer, banks are smart, I have heard a lot from a old banker in my country, he exposed a lot to me about bank internal operations, I am always surprised seeing some banks folding up, because it's way easier to make money running a bank, so much illegal money making schemes behind the close door but looks so legal.

[tabas]

And then what? Banks are tied up with the government and their respective Central Bank for each of their own. They are regulated so there's no matter whether they'll offer some interesting high interest rates accounts for most of their customers. But if there's nothing like that, you can see that banks have always these services that can be offered to any customer that comes by to them. While I see many people spreads their hate towards the bank, we can't remove the fact that we still need them as of the moment.

[Gozie51]

Banks are close associates of the government and they carry out the financial plans and policies of government. Presently, we can not sperate the banks from government because of those financial policies including interest rate increase when government wants to mop up excess liquidity in circulation. When government also want to devalue, they don't just do that by mere wish but they make policy through the centre bank and it flows down to banks and the people. No matter how we try to look into the cheats running through the banks against the people regards to overcharge in services rendered, the government uses the centre bank as a major implementing pot to her projects and for now the government can't rely of crypto for that and not any time soon especially because they can not manipulate crypto like fiat through the banks in regulating inflow and outflow of transactions as to how they want to run the economy.

[Twentyonepaylots]

If you think the economics of banks are that simple, you are very wrong, the economics of banks are so complex that even imagining it is sickening.

Complex if you explore every part of it, but for us, one who uses banks it is pretty clear. Banks are designed to make money, not to store. So if you are one of their customers, you are part of their large scheme. Sickening, big YES, Imagine depositing in a bank, you take a loan and they put interest on that loan, basically you are paying interest from your money.

But as far as I understand, the banks park their money mostly in securities and loans to their customers, then some in investments, businesses, etc. And because of this, during an economic crisis, many banks will limit their customers from making loans and withdrawing money, because most of their money is somewhere else and when everyone withdraws money from them it means it will disrupt their operations and could cause them to collapse.

Banks are businesses around the world, tbanks do invest the money from their depositors and make that money grow while making money with their customers from charges of keeping their money. If you read the terms and agreement when a crisis happen, you'll understand that you don't matter to them as long as they are continue earning. Bankruptcy affects their customer not them, it is not their money in the first place, customers are the bank, and behind those are just puppeters.

[gunhell16]

If you think the economics of banks are that simple, you are very wrong, the economics of banks are so complex that even imagining it is sickening. But as far as I understand, the banks park their money mostly in securities and loans to their customers, then some in investments, businesses, etc. And because of this, during an economic crisis, many banks will limit their customers from making loans and withdrawing money, because most of their money is somewhere else and when everyone withdraws money from them it means it will disrupt their operations and could cause them to collapse.

What you say is true because it depends on how much money the customers entrust to their bank. Because often the money that banks lend doesn't actually come from their pockets but instead comes from the money that their customers put in, and then they will grow interest on it.

And the interest that they will give to their customers will also come from the interest owed by their other customers, as if it is easy money that the bank earns from money that is not theirs, and then they only give a small amount of interest here per annum. So if there is no one to put money into them to trust them, the banks will close down easily; that's just the cycle of banks' existence.

[adaseb]

I still think this program is ridiculous. When I first heard about it in March I assumed it was some joke. Basically they are giving back their UST at pare value while the market value is much much lower due to the duration risk. I guess it makes sense but I think it would of been better to have a different approach to this.

The main reason this happened is because banks didn’t hedge properly. Yields were at records low and they didn’t think with all the massive inflation going on that they would eventually raise rates and the bonds would drop in value. No rocket science really. Banks should of had economists to predict this.

[wxa7115]

All of my life I have been robbed by the banks, and it's funny to think about, so many of my people trust their banks just as they trust the government, I don't know about others but bank is the greatest scam known to human, so I am not surprised by any scheme they are playing, I just pity people that believe so much that their money should always be in their bank account.

I will never take loan from the bank nor will I ever borrow money from the bank, it's like filling up their pockets, working hard to get them richer, banks are smart, I have heard a lot from a old banker in my country, he exposed a lot to me about bank internal operations, I am always surprised seeing some banks folding up, because it's way easier to make money running a bank, so much illegal money making schemes behind the close door but looks so legal.

In many cases it is not that people trust banks, it is simply they do not know of any alternative, so the small number of people that have some savings prefer to keep it at the bank thinking it will be safer there.

However banks have done a really good job at involving themselves in almost any aspect of the economy, so even if governments were willing to reduce their power they have no way to do it, since most legislators are on their payroll anyway and any proposal which could undermine their privileges will never become a law.

[Zigabel]

Something like this i tought so it's good for markets and traders and for financial world.
Banks are pocketing real money by borrowing money from the Fed's newest backstop facility, which charges a lower rate, and then parking it at another unit of the Fed, which pays higher interest.
Banks are borrowing record amounts from this new facility.

Banks have got other investments and ventures in which they keep their funds in other for them to continually stay in business. Banks also get involved in trading in the financial market and stocks investments aswell not.

[Fortify]

Something like this i tought so it's good for markets and traders and for financial world.
Banks are pocketing real money by borrowing money from the Fed's newest backstop facility, which charges a lower rate, and then parking it at another unit of the Fed, which pays higher interest.
Banks are borrowing record amounts from this new facility.

It's actually the job of the banks to make the best returns for their shareholders and unfortunately that often means taking advantage of any schemes offered by the government, then maximizing them to the fullest extent possible. It's usually the fault of the government, run by politicians or government officials, who fail to understand the business consequences or potential for abuse that well intended offers may induce. These officials are often minnows swimming with sharks, that build laws designed out of good faith but do not have adequate boundaries or restrictions. Sometimes the abuse will start off slow as companies take time to figure it out and then ramp up to extraordinary and unintended amounts, before collapsing due to the scale.

[boty]

In many cases it is not that people trust banks, it is simply they do not know of any alternative, so the small number of people that have some savings prefer to keep it at the bank thinking it will be safer there.

However banks have done a really good job at involving themselves in almost any aspect of the economy, so even if governments were willing to reduce their power they have no way to do it, since most legislators are on their payroll anyway and any proposal which could undermine their privileges will never become a law.

It is true that for some people who choose to keep their money in the bank, of course they have no other choice to keep their assets safer than saving them in the bank, but for some people there are also those who choose to buy real assets and only save a little of their money in the bank. bank and this really depends on each individual's choice. Of course the bank can guarantee the security of the money we save in the bank, so people who don't have other choices will of course keep their money in the bank.

[Parklane777]

I still think this program is ridiculous. When I first heard about it in March I assumed it was some joke. Basically they are giving back their UST at pare value while the market value is much much lower due to the duration risk. I guess it makes sense but I think it would of been better to have a different approach to this.

The main reason this happened is because banks didn’t hedge properly. Yields were at records low and they didn’t think with all the massive inflation going on that they would eventually raise rates and the bonds would drop in value. No rocket science really. Banks should of had economists to predict this.

It's Nice specially b4 christmas it's like gift for markets not bad actually.

[sokani]

Banks do not need to make money when they can create money and watchHow Banks Create Money.

This isn't about printing money but how they can turn a 10K deposit from someone into 250K in the next few years by lending the same money to 10 other people and charging double/triple the interest rate that they pay you.

Banks are really milking their customers. Put your money in a fixed deposit account and get a peanut as interest. Borrow a loan from a bank and payback with hefty interest. Now, who is fooling who? They'll convince you to deposit your money with them while they use it for business, and sometimes when you've need for it, they'll deny you. They also make money from their high charges in the name of cash deposits, withdrawals, card maintenance, sms notification alerts, email notification alerts, bank statements etc.

[jaberwock]

All of my life I have been robbed by the banks, and it's funny to think about, so many of my people trust their banks just as they trust the government, I don't know about others but bank is the greatest scam known to human, so I am not surprised by any scheme they are playing, I just pity people that believe so much that their money should always be in their bank account.

I will never take loan from the bank nor will I ever borrow money from the bank, it's like filling up their pockets, working hard to get them richer, banks are smart, I have heard a lot from a old banker in my country, he exposed a lot to me about bank internal operations, I am always surprised seeing some banks folding up, because it's way easier to make money running a bank, so much illegal money making schemes behind the close door but looks so legal.

In many cases it is not that people trust banks, it is simply they do not know of any alternative, so the small number of people that have some savings prefer to keep it at the bank thinking it will be safer there.

However banks have done a really good job at involving themselves in almost any aspect of the economy, so even if governments were willing to reduce their power they have no way to do it, since most legislators are on their payroll anyway and any proposal which could undermine their privileges will never become a law.

So those people already know that banks are not trusted? But, it's crazy to think that they still put their money on it. Why can't they just hold their money instead? They can buy vaults, install a CCTV, and add others that would increase the safety of their money. If only these people will do their research, they will be aware that there are actually a lot of bank alternatives, especially nowadays.

Of course we have Bitcoin now, and it is thrice or so on... better than the banks. I guess we already know why, so I don't need to explain it again. Banks shouldn't worry though, because like you said, they still have their own importance. Something related to the economy.