Following Sunday night’s declaration of a state of emergency, the Federal Reserve lent The Swiss National Bank (SNB) paid out $101 million through a dollar swap facility. If the loans aren’t repaid by next week, U.S. taxpayers will bear the bills, macroeconomic analysts told the Epoch Times.
then announcement Over the weekend, the Fed announced that it would work with major allied central banks such as the SNB, the Bank of Japan and the European Central Bank to increase the availability of its swap program and allow daily access instead of weekly. “Swap” means a short-term arrangement by a foreign central bank to exchange its currency for dollars to fund dollar-denominated debt.
On Monday, Switzerland asked the Fed for millions of dollars in loans and agreed to pay them back in exactly one week.
It was the first time the SNB has used the Fed’s swap facility effectively since it borrowed more than $11 billion in one week last October.Some macroeconomic analysts pointed The relatively small loans this week are a sign that the financial system as a whole remains strong, and there may be more loans under the hood.
The SNB named 17 “participants” in the October loan, suggesting the dollar was spread across various Swiss financial institutions. On Monday’s loan, the central bank said he only listed two. So while he has fewer dollars going into SNB this week compared to last year, the funds weren’t spread across different banks.
According to Kevin “Meet Kevin” Paffrath, an investor who manages ETFs with over $11 million in assets and founded real estate startup HouseHack, the natural identities of the participants in question are those of Swiss banks Credit Suisse and UBS. is.
Recent UBS agreed to purchase Credit Suisse came under pressure from Swiss authorities, and the SNB promised both institutions “unrestricted access” to central bank resources.
Paffrath told The Epoch Times that SNB’s dollar swap suggests that US money is driving the acquisition. In doing so, the Fed is putting America’s tax dollars at risk.
“It’s a loan from the Fed, and if the loan isn’t paid back, the taxpayer will pay,” he said.[The Fed] It is supported by the Treasury Exchange Stabilization Fund, which is funded by taxpayer spending. ”
Some lawmakers, including Rep. Thomas Massey (R-Ky.) criticized Fed foreign currency swaps for lack of transparency. For this reason, Massey advocated a full-scale audit of central banks to assess how the US dollar is being used abroad.
Additional Fed dollars could soon seep into the domestic and international banking system as some commercial banks continue to struggle.
More bank failures to come
According to Paffrath, investment focused YouTube channel “Meet Kevin”, the financial situation gets worse before it gets better.
He predicts that the banking sector will continue to consolidate with “dozens more local bank failures in the next six weeks,” many of which have led to acquisitions by more prominent names. Investors warned that big bank hegemony would give depositors fewer options.
“This means worse financing options for consumers,” he said.
As Pahlatt sees it, the light at the end of the tunnel will be a reversal of Fed policy. He isn’t predicting any such pivot at this week’s Federal Open Market Committee hearings, when Fed Chairman Jerome Powell announces the committee’s latest interest rate decision.
Good news about inflation could bring the Fed pivot that many investors are hoping for.
“As long as inflation continues to trend downward, the Fed will likely start cutting rates in response to other bank failures,” Pahrat said. “The sooner Treasury yields fall, the better the outcome, as bank asset values rise, minimizing many of the causes that initially sparked this panic.”
Emergency Action or Fed Stance?
Other macroeconomic analysts argue that recent changes to swap facilities are minor events. Former Royal Bank of Canada trader Kevin Muir believes the move was simply a precautionary measure.
“I think the swap line was all about throwing everything in case things got worse,” he told the Epoch Times. why do not you?”
Muir, author macro tourist The Fed hopes to avoid using the swap facility daily, but showing their willingness could restore market confidence, according to the newsletter.
“It’s one of those things.