banksRus

This appears to be an alarmist article about something pretty pedestrian. 1. The fed has intentionally been pulling liquidity out of the system with quantitative tightening. Over the last few years, the fed has shrunk its balance sheet by several trillion dollars (many times what this article is talking about). The fact that there is liquidity tightness is a sign that the fed has succeeded. And they are already stopping their balance sheet run-off, so there is no reason to expect this to get worse. 2. Repos are a standard tool of the fed. This is the system working as designed when there are liquidity issues. 3. It is not even clear to me that there are liquidity issues. This looks more like window dressing. On the 31st, banks and others make themselves look a bit prettier for their regulators and shareholders by holding more cash. This always makes overnight funding a little more expensive overnight on the 31st, so more banks are more likely to use fed lines, either repos or fed funds. That doesn't mean there is a problem or sone kind of shadowy bail out. This happens every year, and to a lesser extent, every quarter end.

The way that this is written feels intentionally exaggerated. E.g. comparing how much banks earned in profit to how much they are pulling/could pull from thr fed makes no sense. Banks are highly levered. They earn low returns on assets (1-2%), so balance sheet items always look a lot bigger than profits. Thats just the business model of banks. Just wait to see how many years it will take them to earn enough money to pay back their deposits! Its comparing apples and oranges, and anyone who thinks about banks seriously knows that.

The victims are the shareholders who were wiped out when the bank went under. The FDIC made the depositors whole, but not the other parts of the bank's capital structure.