Code YOUTUBE50: SOLD OUT
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TIMECODES
0:00 2008 All Over Again
1:13 2020 Money Printing
4:29 Inflation Stuck Around for Too Long
6:28 Banks Were Not Banking on a Bank Run
8:06 The Bank Term Funding Program
11:37 How Does This Affect the Treasury Market
14:19 Why BTFP is Exploding in Usage
16:01 Reverse Repo Facility
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LEARN MORE ABOUT: Bank Failures
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The Federal Reserve’s Bank Bailout Facility, also known as the Term Asset-Backed Securities Loan Facility (TALF), is facing major challenges that are causing it to struggle and potentially blow up right now. This facility was established in response to the 2008 financial crisis to provide liquidity to the financial system by issuing low-interest loans to investors who pledged certain asset-backed securities as collateral.
One of the main reasons why the TALF is facing difficulties is due to the economic fallout from the COVID-19 pandemic. The widespread economic shutdowns have caused a sharp decrease in demand for various types of asset-backed securities, including credit card debt, auto loans, and student loans. This has made it difficult for investors to find suitable collateral to pledge in exchange for loans from the TALF.
Additionally, the uncertainty surrounding the future of the economy has made investors hesitant to participate in the TALF program. With the potential for widespread defaults on underlying loans, investors are wary of taking on additional risk by pledging these assets as collateral. This has resulted in a lack of interest in the TALF program, further hindering its ability to provide liquidity to the financial system.
Furthermore, the structure of the TALF program itself has also contributed to its struggles. The program requires investors to put up a significant amount of their own capital as a down payment for the loans, which has made it less attractive compared to other forms of financing. Additionally, the TALF program has strict eligibility criteria that limit the types of assets that can be used as collateral, further restricting its effectiveness.
In response to these challenges, the Federal Reserve has announced plans to expand the TALF program to include new types of asset-backed securities, such as commercial mortgage-backed securities and collateralized loan obligations. Additionally, the Fed has pledged to provide additional support to the program in order to boost participation and provide much-needed liquidity to the financial system.
Despite these efforts, the TALF still faces an uncertain future as it grapples with the impact of the COVID-19 pandemic and struggles to attract investors. The success of the program will likely depend on the overall health of the economy and the willingness of investors to participate in the program. As the situation continues to evolve, it remains to be seen whether the TALF will be able to overcome its current challenges and fulfill its mission of providing liquidity to the financial system.
Code YOUTUBE50: SOLD OUT
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The BTFP ceased making new loans March 11th 2024. Existing loans are still honored.
I know it's a month old, but just saw this video and wanted watch since this is BTFP end day, to see what the explanation is for what might happen.
I don't agree that the lack of reserves/deposits problem goes away because the Treasury is offering money in the RRP a better deal with T bills. That by selling debt,.. the money the Treasury gets and spend winds up in the troubled banks as deposits. That's way to simplistic.
I think quite the opposite happens.
The new T bills are competing with what the banks can pay in interest for deposits and therefore there will still be flight.
The banks still have the unrealized losses,.. which is especially bad on their "held for sale" treasuries,… but also for the "held to maturity,".. because they're having to hold these treasuries for years earning 0.05% to 1% or even 2% missing an opportunity to earn 5% themselves,.. while depositors are still fleeing for the 5% treasuries.
Or an equally bad situation exists even if the end of the BTFP doesn't mean they have to pay the money back now,.. but are still stuck paying the Fed 5% for the money borrowed from the BTFP.
I believe average durations on the treasuries the banks are holding are 5 to 10 years,… a 1 year reprieve isn't going to regain them much on the convexity.
The only way to resolve this is for the Fed to reduce the Fed funds rate low enough so the banks can breakeven on their treasuries.
I think this bank crisis thing rears it's head again very soon. Especially with CRE roll overs coming due and CRE selling for pennies on the dollar.
Fucking shell game.
How can I profit off of this
good report
Buy gold
What a great time to have a open border along with making gig work illegal and eliminating jobs through automation and AI.
Thanks for the explanation. I didn't realize that this special facility bailed out the bond market. Not just the badly managed bank This is truly insane. Only time will tell what the ramifications of this back door quantitative easing we'll be.
Thank you for explaining this complicate program.
@20:00 explain “when government spends money it goes into someone’s bank account”
I'm still confused about what happens to the bond market once the program ends.
Many people closed their traditional bank and moved to SOFI because savings accounts are paying 4.6% with direct deposit. Much better than the .02% traditional banks are paying and no need to lock it up in a CD.
You keep assuming that these entities are making mistakes. That itself is a mistake. Everything that is happening has been meticulously planned and is playing out precisely as intended. If you sysrt basing your videos on this fact, their endgame with come into sharp focus.
Heresy, the sound dollar policy was abandoned in 2008, and printing has been going nonstop since around 2010, the printing didn't start in 2020.
Bank bailouts are basically a misleading way of calling it what it is; which is nationalization.
Are those gold bars in the background real?
This video is awesome. I think I learned more in this 1 video than any of my university's finance lectures.
do you explain everything at your online university the way you did in this video. It was awesome for a noob like me. Do you have q&a ability for anyone that enrolls in a month to month subscription. i might be able to afford for like 3 months :).. thank you for posting free videos.. it helps me learn areas that I was always interested in and but ever could afford to go to college for it
What does this mean for the bond market going forward?
So wait, the bank term funding program is basically a giant pawn shop?
20x increase in i%… (brrrr) whats that I hear? (brrrr) sounds like Fed printer is coming on
I dont think this bailout ends, sinxe as you said they bought BAD corporate assets that wont produce a dime. Someone has to take the L and its the Fed holding the last loss bag
One last economic push for the election year. Sounds like risk assets til march 2025, when all these programs loans expire
Extensive regulation, deposit insurance, money creation, bailouts… Let's be real a bank is basically a quasi-government entity.
Two questions. When the banks have to buy back the assets the fed program bought at par, will the banks have to buy back the assets at the price they sold it to them at?
Also I’m wondering how all this will affect the price of short term and long term treasuries over the year.
Thanks!
The idea that banks somehow make their profits by lending out depositors money to borrowers who they charge a higher interest rates to the rates they are paying depositors is a myth because when banks make a loan such as a mortgage loan they simply check the credit score of the customer then type in the amount the bank is lending to the customer (even though the bank may not hold the relevant funds) then that amount becomes owed by the customer plus the interest to the bank. So in the case of the 2008 financial crisis when banks created a bubble in the housing market by giving out huge amounts of typed out number mortgage loans to virtually anyone who applied and when the customers could no longer afford to make any repayments due to interest rate rises and then the housing market crashed, thousands of homes were repossessed by the banks, customers lost their deposits plus any payments made on the property as well millions of people losing their jobs and the economy badly affected. However bankers profited from the repossession of homes and retaining customer deposits and by being bailed out by the central bank or the Fed who paid full price for the mortgage backed securities. So to say banks were holding underwater assets, in this case the MBS or the homes as collaterals, doesn’t make any sense as ultimately they would have profited to the amount of the loans that were initially issued done merely through a few keystrokes on the computer.
In the case when banks purchased treasury bonds with depositors money which depreciated in value when the Fed raised interest rates in March 2023, why did that threaten the solvency of banks and require the Fed to bail out the banks using the BTFP program when banks could have simply created the deposits in their depositors accounts by typing a few numbers on the computer.
Since when was any of this a secret? Communism IS juuda ism.
Great vid. Love it!
The text also said the BTFP, while it is set to expire in March of '24, can be renewed by the Fed if needed.
BUY THE FUCKING DIP
Except this time it’s more than just a few sectors, it’s now gauging of the American dream, the government has allowed it.
Private Money and Government Debt
January 17, 2024
Yutaka Homma
If we organize the "Great Global Money Expansion" of the past 100 years, we believe that it can be basically categorized into "money injection by central banks," "money creation by private financial institutions," and "money siphoned off in response to the rapid increase in government debt. In other words, although the "development of private financial institutions" was observed after the "creation of central banks," after the "Nixon Shock of 1971," the "world money" created by the "massive balance sheet expansion of private financial institutions" was rapidly siphoned off in the form of "government debt. This is the reason why the "global money" created by the "massive expansion of balance sheets of private-sector financial institutions" was rapidly absorbed in the form of "government debt.
And if we consider this point from the perspective of the "credit multiplier (monetary multiplier)," i.e., the formula "credit multiplier = M2 / base money," we can see that in the current situation in Japan, M2 is 1,240 trillion yen and base money is 673 trillion yen. The credit multiplier is about 1.8 times as large as the base money. In other words, although "1,240 trillion yen – 673 trillion yen = 567 trillion yen" is the current "private-sector money," we can also understand that "most of the base money is invested in government bonds, which are government debt.
Furthermore, it can be seen that "Japan's credit multiplier," which peaked around 1990 at about 13 times, has been rapidly declining since then, and the reason for this is that "ultra-low interest rates have been maintained to ensure the survival of the financial system, and the government has been sucking up private-sector funds. The reason for this, we feel, is "the maintenance of ultra-low interest rates to ensure the survival of the financial system and the government's siphoning off of private capital. In other words, "a situation in which market prices were controlled globally through the use of derivatives." The focus of attention at that time was "the massive expansion of the balance sheets of private financial institutions off-balance sheet," which I believe contributed greatly to the "creation of money.
However, today, in "advanced countries in Japan, the U.S., and Europe," "private money is being siphoned off by government funds and bad debts caused by rising interest rates," and as a result, "fiscal finance," or "massive printing of paper money or massive issuance of CBDC (central bank digital currency)," is expected to soon be the result. As a result, it is thought that the situation will soon evolve into "fiscal finance," i.e., "a situation in which the government's debt is financed by either a massive printing of banknotes or a massive issuance of CBDC (central bank digital currency).
In other words, we may already be in the same situation as the Soviet Union in 1991, Japan in 1945, or Germany in 1923, but what we need to keep an eye on is "when and how will the global financial cataclysm and hyperinflation will occur?" In fact, I feel that a "collapse of megabanks" accompanied by a "complete collapse of derivatives" is the most likely scenario.
Translated with DeepL.com (free version)
The Fed will never allow the regional banks to fail. When March arrives the Fed will simply extend the BTFP indefinately !
Wouldn’t the buyback of the loans effectively become Quanitiative easing at that point and increase the money supply in circulation?
Hit 200k today. Thank you for all the knowledge and nuggets you had thrown my way over the last months. Started with 14k in last month 2023.