More Bailouts for Bankers Won't Fix a Broken Financial System
The Federal Reserve Board reduced banking reserve requirements to zero in March 2020. So banks in the United States are technically not required to back customers' deposits with anything.
Even as Chairman Jerome Powell had previously insisted that the Fed already had all the "tools" it would need to handle any crisis, the Fed created an extravagant new tool in response to the failures of Silvergate Bank, Silicon Valley Bank, and Signature Bank.
The Fed's new Bank Term Funding Program (BTFP) is a modified bank bailout program, and it's being accessed by other banks now buckling under pressure from their bad investments and fleeing depositors.
So what happens next?
Many in the U.S. wonder when other regional banks will fail or if the world's largest banks will take them over.
This 0% reserve requirement policy makes further bank collapses more likely.
But other negative forces are also at work.