"US official says banks not being bailed out" - nah, they're being bailed out, here's how

On the news here:

• US Treasury official says banks not being bailed out, depositors are being protected

He is half right, depositors are being protected, but banks are getting a bailout Bailout A bailout is defined as a provision or mechanism of financial assistance to either a corporation or country in a bid to avert bankruptcy. The term became popularized during the global financial crisis in the United States following the passage of massive stimulus packages. A common example for many involved the bailout given the to the US automotive sector in 2009 to help avert its collapse, given the importance it held in the US economy. For example, the automotive company General Motors was gi A bailout is defined as a provision or mechanism of financial assistance to either a corporation or country in a bid to avert bankruptcy. The term became popularized during the global financial crisis in the United States following the passage of massive stimulus packages. A common example for many involved the bailout given the to the US automotive sector in 2009 to help avert its collapse, given the importance it held in the US economy. For example, the automotive company General Motors was gi Read this Term and here's how.

The Federal Reserve announced a new Bank Term Funding Program (BTFP)

• This allows banks to pledge collateral at par.
• This means holdings of long-dated Treasuries or MBS with mark-to-market losses can unlock liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term based on the original value.

You may recall this from last week, although we've been noting it long before last week:

• “Held to maturity” bonds are about to be a big problem

The crux:

• "For the 24 big U.S. lenders in the KBW Bank Index, the combined balance-sheet value of held-to-maturity bonds was $2.21 trillion as of Sept. 30, according to a Wall Street Journal review of their filings. The market value was $1.91 trillion, or 14% less. The gap was negligible when the year started."
• That's a $300 billion hole.

OK, now this new Bank Term Funding Program (BTFP), as noted above .... means holdings of long-dated Treasuries or MBS with mark-to-market losses can unlock liquidity based on the original value.

I've seen estimates put the hole at 600bn USD, not the 300bn USD noted above. But, no matter! The Fed program accepts collateral at par, so all those unrealised losses on held-to-maturity Treasury and MBS securities portfolios ... not a problem. That is, bailout in all but name.

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For monetary policy, now that this is the case, it means the Federal Open Market Committee (FOMC) can proceed full steam ahead on rate hikes.