Banks take advantage of the Fed’s crisis lending programs

Financial institutions borrowed billions of dollars in short-term from the Federal Reserve this week as the industry copes with a severe crisis in confidence and liquidity, the central bank reported on Thursday.

Using tools the Fed rolled out Sunday, banks looking for cash injections borrowed $11.9 billion from the Bank Term Funding Program. Under this facility, banks can take out one-year loans on favorable terms against high-quality collateral.

Most banks took the more traditional route, taking advantage of the Fed’s discount window on slightly less favorable terms, borrowing nearly $153 billion in total. The rebate window offers loans of up to 90 days, while the BTFP term is one year. However, the Fed eased conditions on the discount window to make it more attractive to borrowers who need working capital.

There was also a large increase in bridging loans offered, also made on a short-term basis, totaling $142.8 billion, which were mostly given to now-closed institutions to enable them to meet commitments related to depositors and other expenses.

The data comes just days after regulators shut down Silicon Valley Bank and Signature Bank, two institutions favored by the high-tech community.

Amid widespread fears that customers using the Federal Deposit Insurance Corp. exceeding $250,000 could lose their money, regulators stepped in to secure all deposits.

The programs added to the Fed’s balance sheet, escalating the balance by about $297 billion.