J.P.Morgan Weigh In On Usage Of Discount Window & BTFP

J.P.Morgan note “as of yesterday, banks had $152.9bn in outstanding borrowings from the Fed’s primary credit lending program (more popularly known as the discount window), an increase of $148.3bn from last Wednesday. The Fed also had $142.8bn in loans outstanding to the two FDIC-created bridge banks. By contrast, the newly-created Bank Term Funding Program (BTFP) had a much smaller $11.9bn of credit extended yesterday. For eligible collateral—UST, agency MBS, agency debt—the terms of the BTFP are more favorable than primary credit. So there are at least two explanations for the discrepancy in usage. The discount window accepts a much wider range of collateral, or banks may have already had systems in place and been more familiar with the discount window.”

• “In total the Fed had $318bn in loans outstanding to the financial system. This is about half what was being extended in the GFC (and much less when foreign banks are included). But it is still a big number. The glass half-empty view is that banks need a lot of money. The glass half-full take is that the system is working as intended. In particular, the record-high primary credit borrowing could indicate that the stigma of going to the discount window is finally starting to fade.”