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To manage these losses temporarily, banks have relied heavily on emergency borrowing via the Federal Reserve’s Bank Term Funding Program (BTFP). This program allows banks to borrow against their devalued securities without having to sell at a loss immediately. Although it provides short-term relief, the BTFP does not fix the underlying problem and merely acts as a temporary band-aid.
The Financial Health of US Banks: Indicators from FDIC Data
Recent FDIC reports paint a somewhat concerning picture of the health of the banking sector: