Under normal conditions you would be correct, but recall the The Fed did something unusual when SVB collapsed with a few others that followed, it set in place a ‘special’ program for banks. That program ended in March.
Now...it is only a matter of time...months likely, that the digital move will happen. It has to happen due to the sovereign debt. My guess...it will be after the election or real close to it.
And it won’t matter who wins...this di has already been cast.
The Bank Term Funding Program (BTFP) is a lender of last resort facility. It was created in March 2023, after the failures of Silicon Valley Bank and Signature Bank, to lend to other banks that had big unrealized losses on their holdings of government bonds and were, therefore, at risk of large-scale withdrawals of deposits.
The facility allows banks to exchange assets such as U.S. Treasuries for cash at their full-face amount, regardless of the current market value. These loans are for up to one year at an interest rate equal to the one-year overnight index swap (OIS) rate, plus 0.10 percentage points.
This rate varies daily. As of April 28, the BTFP rate was 4.92%. As of May 8, the BTFP rate was 4.81%. As of May 3, banks borrowed $75.8 billion through the Bank Term Funding Program, down from $81.3 billion the week before.
The Treasury has earmarked $25 billion to backstop the BTFP, but the Fed said it does not anticipate it will have to draw on that.
The Fed said in January 2024 that the BTFP would stop making loans, as scheduled, on March 11, 2024. It also adjusted the interest rate on any new loans to be no lower than the interest rate that the Fed pays on bank reserves. Until that change, some banks borrowed heavily at the BTFP and deposited the funds as reserves at the Fed at a higher interest rate to make a profit. As that maneuver became more attractive, bank borrowing from the program rose from about $100 billion in June 2023 to $161.5 billion in mid-January 2024.
This program did not take losses off of banks' books.
They were short-term loans to improve liquidity so they didn't have to panic sell bonds and declare losses.