where are these banks going to be making money “going forward”?
That’s easy: borrow money from the Fed at 1% and use that to buy TBills at 3.9%
I don’t think they will be doing all that much of that. They will do some, but not too much, otherwise the demand for Tbills will drive the rate lower.
Actually, the effective Fed Funds Rates has been at .23 for several days. So the banks can simply hang onto their money and the Fed will pay them interest on their reserves parked at the Fed. (one of the most asinine, bonehead moves of all time, amounting, yet again, to another giant taxpayer subsidy for the banks)
There are just too many moving parts in this machine to make reasoned forecasts. IMO we’re headed into a Japan-type situation, and ST rates will probably decline further; to very little effect.
Good thing we have 0bama and Jamie Gorelick to straighten things out. Yuk. Horrible.