Slicing up the emergency balance sheet expansion at the Fed
The Silicon Valley Bank crisis prompted a sharp reversal of the Federal Reserve’s effort to shrink its balance sheet. The Fed had been letting securities mature for months, gradually reducing the stockpile of bonds accumulated during waves of quantitative easing.
In just two weeks, the balance sheet expanded by more than USD 339 billion. This pie chart breaks down that increase and its two main components: the bailout of depositors and last-resort lending.
About USD 180 billion was loaned to the Federal Deposit Insurance Corporation, classified under "Other Credit Extensions." Traditionally, the FDIC borrows from the Treasury; however, the Fed stepped in amid the current political standoff over the debt ceiling.
Primary Credit jumped by USD 105 billion due to lending through the "discount window," normally a last-resort funding source. This topped the weekly peak in 2008, reflecting the stress on banks’ funding as higher rates pressure their fixed-income assets.
The Bank Term Funding Program grabbed the headlines; this limited-time, emergency facility provides liquidity to banks. It’s been a relatively small slice of the pie so far, accounting for about USD 53 billion.