Alphecca Muttardy on Macroeconomic Policy Nexus

The demand driven approach is more efficient, getting temporary liquidity into banks when and where it is needed. Problem is, it masks identifying underlying problems at banks that might be insolvency problems, rather liquidity problems. That happened in 2019 when the Fed's overnight lending facility balance, and overnight interest rates, shot up, and all the lent money went only to a couple of banks. Pam Martens (https://wallstreetonparade.com/2022/02/when-repos-blew-up-in-2019) tried to delve into this, but never got a full explanation from the Fed. Now, Jerome Powell is accepting that mega banks can hold far less in capital than their balance sheets suggest (https://bettermarkets.org/newsroom/new-fed-research-shows-wall-street-megabanks-are-undercapitalized-and-pose-needless-risk-of-failure-crashes-and-bailouts/), making the possibility of a world black swan event more likely. Not to mention the threat of the failed hedge fund basis trade and proposals to set up a hedge fund bailout tool (https://www.youtube.com/watch?v=PIWwph9vUQg&t=1s). No liquidity window is capable of fixing these fundamental flaws with our U.S. financial system.