January 18, 2024Dear Chair Powell:In March 2023, amid the failure of Silicon Valley Bank, the Federal Reserve created the Bank Term Funding Program (BTFP or “the program”). These reserves are paying a higher interest rate of 5.40 percent, allowing financial institutions to profit on the difference. Surely, the Federal Reserve should not be providing credit at more favorable rates than the market. This month, the Federal Reserve reported another historic loss – a $114.3 billion operating loss in 2023, up from $16.6 billion the year prior, which was the first time the Federal Reserve has ever lost money. Is the Federal Reserve considering changing the terms and conditions of the program to stop this arbitrage before its expiration in March 2024?

Source: Wall Street Journal January 18, 2024 22:24 UTC