Fed Slashes 14-Day Repo Loans to $25 Billion; Will Cut Further in March

By Pam Martens and Russ Martens: February 18, 2020 ~

Jerome Powell, Chairman of the Federal Reserve

Jerome Powell, Chairman of the Federal Reserve

Federal Reserve Chairman Jerome Powell sat through two days of grueling hearings before the House Financial Services Committee and Senate Banking Committee last week. At numerous times, the Fed and Powell were portrayed by Congressional members as sugar daddies for Wall Street while aloof to the financial suffering of the average American. (See Fed Chair Tells Congress There Is a 10-Year “Game Plan” to Deal with Financial Crisis But No Plan to Deal with Americans Left Devastated By It.)

The House Financial Services Committee held its hearing on Tuesday. The Senate Banking Committee held its hearing on Wednesday. On Thursday, in a surprise move, the Fed announced that it would be trimming the $30 billion it has been making in 14-day loans (at about 1.60 percent interest) to Wall Street’s trading houses to $25 billion through March 12 and trimming that amount even further to $20 billion beginning on March 17. The 14-day loans are made twice a week, typically on Tuesday and Thursday, and are in addition to the daily 1-day loans the Fed has been making every business day to trading houses on Wall Street since September 17 of last year.  The 1-day loans currently have a cap of $100 billion per day.

This morning’s money funnel by the Fed to Wall Street totaled $78.55 billion. It consisted of $53.55 billion in a 1-day loan and $25 billion in the 14-day loan. It’s not a good sign that the 14-day loan was oversubscribed by $14.9 billion. The demand for more 14-day money than the Fed is willing to supply has been happening regularly of late.

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