The Fed knows what is on banks' balance sheets. So while they may not have been able to predict that a bank run would happen they definitely knew that these bonds wouldn't be resalable. My bet is that the fed sees pressure on the stock market and banking system as an unavoidable side-effect of reducing inflation. If the only casualties are bank that went heavy on crypto and another that lent money to companies making $400 juicers then that's within acceptable bounds. Given that the Fed is lender of last resort to banks, and has a way to provide them with liquidity in exchange for assets why do you think they'd stop hiking rates?
Because rate hikes are what caused this crisis in the first place.
Further rate hikes will cause further trauma to banks, further stimulating the need for liquidity, and when the Fed provides the liquidity it creates inflation.
I don't see how collateralized loans with a 1 year term and 4.68% interest are equivalent to QE.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm
I don't work in finance or keep much of an eye on wall street so treat my stance as mostly uninformed conjecture.
The FDIC 250K limit has been wiped and the FDIC is now broke. The Fed, with a balance sheet of $8 trillion, will now provide liquidity for up to $19 trillion in deposits.
Bank withdrawls have been on an accelerating trend as depositors look to more desirable places to stash their cash. A bunch of banks holding a bunch of low-yielding bonds were having to hold firesales to meet the needs of depositors wanting to withdraw cash.
Banks were already sitting on billions+ of unrealized losses at the end of 2022, and they continue to sit on a bunch of assets that have lost value as rates have increased and depositors want their money.
So the Fed has stepped in and offered to buy up the below par assets at par, thus providing liquidity.
The Fed creates the money to swap the below par asset at par. This is QE, just in a different package.
