In the face of turmoil in the banking sector, American banks and depositors have realized the merits of their financial regulator. The Federal Reserve gave an immediate response to the crash of two medium-sized banks. Immediate emergency measures reassured investors’ nerves and quelled market jitters. All in all, the full-blown crisis seems to have been averted. 

Cash-short banks borrowed from the Federal Reserve a record $164.8 billion in mere a week. The US central bank promptly pumped up domestic banks with financial aid to prevent a collapse in the banking system. A week before emergency measures were adopted, the amount of borrowings had equaled only $4.58 billion. The previous burst of generosity occurred during the financial crisis of 2008. Interestingly, the Federal Reserve allocated one and half times less cash that time, i.e. $111 billion. At present, some US banks rushed to borrow money to sustain their liquidity, others quickly followed suit.  

The panic in the US banking sector broke out after the failure of Silicon Valley Bank ranked 16 in terms of the size of assets. SVB Financial Group became the largest bank to crash in the last 15 years. Shortly after, another decent bank, Signature bank, declared its bankruptcy. This triggered an alarm among common American depositors. Other financial institutions encountered massive withdrawals of deposits and a consequent slump in market quotes of their stocks. 

On the spot, the US Federal Reserve launched the Bank Term Funding Program (BTFP) to ensure emergency lending to the banking sector. According to JPMorgan estimates, the US central bank may provide liquidity to the worth of almost $2 trillion.