Zero Hedge asks “Did The Fed Quietly Bail Out A Bank On Tuesday?” They describe their evidence as “circumstantial,” but bank credit exploded, the Fed made its first net MBS bulk purchase since QE1, and there was a surge in discount window borrowings. Of course we will find out what bank bellied up to the Fed’s discount window bar two years from now.
ZH quotes Barclays’ Joseph Abate,
After months of virtually no use of the Fed’s discount window, borrowing jumped to an average of $400m/day in the week through Wednesday. The Fed reports only the weekly average of daily borrowing and the daily amount outstanding on Wednesday. From these figures, we estimate that on one day last week, total discount window borrowing reached $2.5bn. Of course, the same $400m/day weekly average could have been achieved with a bank borrowing $900mn on Friday. It is unclear what prompted this pick-up in borrowing from the Fed. There was neither a spike in the fed funds rate nor any disruption in the repo market, so we are a bit puzzled.