Re:America’s banks are missing hundreds of billions of dollars
by AnimalMuppet on Wednesday March 22, 2023 @09:35AM
(#35260786)
The Fed controls one[1] specific, very short term interest rate. The other rates are determined by the market, though they do take the Fed rate into account.
[1] Normally. Sometimes the Fed does something like Operation Twist or QE or something, where they intervene in the markets of other rates. But that is not the normal way this works.
Re:America’s banks are missing hundreds of billions of dollars
by nemo44x on Wednesday March 22, 2023 @11:13AM
(#35262268)
> ...though they do take the Fed rate into account.
Understatement of the year. It's based entirely on what they think the Fed will do in the future.
Re:America’s banks are missing hundreds of billions of dollars
by opportune on Wednesday March 22, 2023 @08:08PM
(#35268850)
Fed open market operations are entirely to adjust the market conditions regarding rates to what they want them to be. The Fed is participating in these transactions to the tune of trillions of dollars
This would not have been an issue if the Fed raised rates gradually over years and kept the bonds more or less even because of time value. But they panicked and very possibly because they have been politicized. They should have started raising rates in 2021 but with the election and the Fed seat up for appointment they sat on their hands.
There’s blame to spread around but there’s a reason 100s of banks are in this situation right now. They were all following the Feds regulations and guidance. And now they’re holding all these lousy bonds and the deposits that back them want to be moved into high interest accounts now. Whoops.
Had they guided for this then banks would have went shorter term.