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The Finance Professor Podcast is hosted by Linus Wilson. Dr. Wilson earned his Ph.D. in 2007 from Oxford University. He has taught thousands of finance students at all levels. His research is in banking, financial crises, CEO pay, and corporate finance. He has been a source for over two hundred major news stories in the Wall Street Journal, New York Times, Financial Times, and other news organizations. He is a leading scholar on the TARP bank bailouts of the great recession.
Episodes
Saturday Apr 08, 2023
Saturday Apr 08, 2023
Dr. Linus Wilson reads his latest paper about the bank runs at SVB and Signature Bank and the Federal Reserve's emergency loan program to save the banks from further uninsured deposit runs.
The Fed Funds Risk-Premium after the Silicon Valley
Bank Run and the Bank Term Funding Program (BTFP)
28 Pages Posted:
Date Written: April 8, 2023
Abstract
We find the emergency lending program introduced on March 12, 2023, called the Bank Term Funding Program (BTFP) coincided with a statistically significant increase in the risk-premium on Fed funds loans relative to the shortest-term T-bills. We find that the risk-premium on Fed funds loans less 28-day T-bills increased by between 39 to 56 basis points in the wake of the Silicon Valley Bank and Signature Bank runs. This led to a stealth loosening of monetary conditions without a Fed funds rate cut in part due to the incentives created by the BTFP to have banks hoard Treasuries and other eligible collateral.
Keywords: Bank Term Funding Program, BTFP, emergency lending Fed, Federal Reserve, Fed funds rate, Signature Bank, Silicon Valley Bank, T-bills, Treasuries
JEL Classification: E43, E51, E52, G21, & G28
Suggested Citation:
See all of Dr. Linus Wilson's research at www.financeprofessor.org or www.linuswilson.com
This is not investment advice.
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