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Michael Howell: Can The Fed Keep Raising Rates During A Banking Crisis? | Michael Howell
Forward Guidance
Is This a Quantitative Easing?
Central bankers are clearly concerned about funding. And I think they're much more up with events now than they were previous times. If you look at the division between, let's say, smaller banks in the US and the bigger banks, start with the smaller banks. They've got effectively about $1 trillion of eligible securities that they can post to the Fed in this bank term funding program. So if the Federal Reserve supports them through that mechanism, even disregarding the discount window borrowing, that would actually increase the asset side of the Fed balance sheet by close to $1 trillion. Now, it may well be that that process involves a migration of deposits out of the small banks towards the big banks
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