#$$BTC

Well-known financial blog ZeroHedge said that the Federal Reserve's total capital is only $51 billion, while the loss is as high as $948 billion, and it is seriously insolvent. The article mentioned that with the expiration of the bank's Term Funding Program (BTFP), the collapse of Republic First Bank has fired the first shot in a new round of banking crisis.

After the collapse of large banks including Silicon Valley Bank and Signature Bank, the banking system returned to calm for most of 2023, thanks in large part to an emergency program developed by the Federal Reserve to rescue other troubled banks, a tool known as the BTFP.

However, the program actually expired a few weeks ago. In other words, the Fed no longer provides emergency loans to troubled banks.

"Just one month later, we have already witnessed the first case of a bankrupt, with Pennsylvania-based Republic First Bank being shut down by regulators last Friday (April 26)," ZeroHedge wrote. #BankingCrisis#

Republic First Bank has the same problem as the other companies that collapsed in 2023, with too many "unrealized bond losses" on its balance sheet. Like Silicon Valley Bank and Signature Bank last year, Republic First Bank used customer deposits to buy U.S. Treasuries in 2021 and 2022 when bond prices were at historical highs.

By the beginning of 2023, the situation had reversed. Bond prices plummeted, even the prices of U.S. Treasury bonds, which were considered "safe and stable", fell sharply, and banks suffered huge losses.

ZeroHedge emphasized: "Remember, when interest rates rise, bond prices fall. So when the Fed raised interest rates from 0% to 5% to try to control inflation, they simultaneously caused huge losses in the bond market, which also meant huge losses for banks."

Silicon Valley Bank is just the tip of the iceberg, and many other banks have suffered huge bond losses. In fact, the total unrealized losses of the banking industry in 2023 are as high as $620 billion.

The Fed knew they had a huge problem on their hands, so they created this BTFP Bank Term Funding Program, which was basically a giant game of “make believe.” Through the BTFP facility, banks could borrow from the Fed using their deteriorating bond portfolios as collateral. But instead of valuing the bonds at actual market prices, everyone simply pretended that the bonds were still worth the same.

In other words, banks simply price their assets because the Fed allows them to do so.

In 2023, the Fed successfully prevented any further embarrassing bank failures by sprinkling this magic powder throughout the banking system.

But now that the BTFP has expired, the problems in the banking system have obviously not disappeared, and the failure of Republic First Bank a few days ago was just a symptom.

ZeroHedge mentioned: "Think about it, bond prices are still falling because interest rates are still much higher than in 2021-2022, and banks are still facing huge unrealized losses. Now that the Fed is no longer playing the pretend game, bank failures have begun again."

"It's not that all banks are in bad shape; some banks wisely used the last twelve months to fix their financial institutions. Unfortunately, most did not, which is why the U.S. banking system still has over $500 billion in unrealized losses. This means Republic First likely won't be the only failure unless the Fed steps in with the 'magic fairy dust' again," the blog continued.

Keep in mind, too, that losses in Treasury portfolios aren't the only problem in the banking system. Many banks face large potential losses on office loans, for example.

The report pointed out: "We think the severity of this problem is far less than the 2008 financial crisis, when some of the world's largest banks collapsed. But the reality is that many banks still have large unrealized losses, and one of the largest happens to be the Federal Reserve."

According to its financial statements released just last month, the Fed's total unrealized losses are almost $1 trillion, or $948.4 billion to be more precise, with the vast majority of unrealized losses coming from U.S. Treasuries. So, like Silicon Valley Bank, Signature Bank, First Republic Bank, and now First Republic Bank, the Fed is completely insolvent.

In fact, the total capital of the Federal Reserve is only 51 billion US dollars, while the loss is as high as 948 billion US dollars, which means that the Federal Reserve has gone bankrupt more than 19 times.

"Imagine that the world's largest and most important central bank, the manager of the global reserve currency, is completely insolvent by market value. You might think this would make front-page news, but no one ever talks about it, or even wants to talk about it," the report said.

"Of course, many people will insist that this is not important, just as they insist that national debt is not important. But this is an even more absurd fantasy. Look at the facts. The report released by the US FDIC shows that the unrealized losses of the US banking industry exceed 500 billion US dollars."

The Federal Reserve would theoretically rescue the banking industry, but it itself is unable to repay its $900 billion debt.

The U.S. government, which was supposed to rescue the Federal Reserve, was unable to repay its debts of more than 50 trillion U.S. dollars.

The report finally pointed out that, just like the BTFP rescue tool, everyone wants to play a huge "pretend" game, pretending that the solvency of the Federal Reserve is not a problem and the huge debt of the US government is not a problem. But on the contrary, they are huge challenges. The ultimate consequence will be that the US dollar loses its status as a global reserve currency.