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Bank Term Funding Program Is Ending

March 7, 2024

FED is ending BTFP on March 11th

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What the Supply Chains Looks Like in Future?

March 2, 2024

After all the turmoil, what supply-chains might look like.

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Bank Term Funding Program Is Ending

Banking Term Funding Program is a program to give short-term funding to depository institutions to make sure that they have ability to meet the needs of all their depositors. In other words, to make sure banks have enough money if smaller or larger scale bank-run occurs. This program was created to help distressed banks in the spring of 2023. Then for example Silicon Valley Bank failed and people started to question is their money safe in other much smaller banks than Silicon Valley Bank.

The need for this program peaked in the week starting Mar 20, 2023 with about $32 billion worth of funding given to banks and other depository institutions during that week. Although the need for this program quickly ran out and hasn't basically been needed since the June 2023, smaller spikes in need has occurred during and after December 2023. Peaking in the week starting Jan 8, 2024 with about $12 billion dollars of funding given to banks during that week. So there has still been distressed banks and other depository institutions after the turmoil of spring 2023.

Federal Reserve Board announced on their Jan 24, 2024 press release that the Banking Term Funding Program would "cease making new loans as scheduled on March 11" 2024. After that distressed banks and other depository institutions would need to resolve their needs for money by selling their assets. These assets are mostly Treasury Bills and Bonds, and Mortgage Backed Securities. And in the end in case of a bank failure the deposits are insured by Federal Deposits Insurance Corporation which has money to pay-out few percentage of all money deposited in the insured banks and other depository institutions.

The recent spikes in the usage of this program has mostly been because bigger banks have used this program to loan money with lower interest rate than the shorter-term funding rates. Also other terms of these loans have been favorable to banks than their usual funding sources. This has made possible for banks to loan money cheaper and then loan it forward with higher interest rates and make profit from the difference. “As the BTFP rate has fallen below shorter-term funding rates the program has seen increased borrowing from banks, presumably due to the favorability of the terms,” said Michael Feroli, JPMorgan’s chief U.S. economist.



  • Mar 8, 2024 - Added quote from Michael Feroli about banks using BTFP for arbitrage

Apple and Foxconn Leaving China?

Employees of Foxconn Rally for Severance Package

Employees of Foxconn rallied within the factory compound of Guanlan factory of Foxconn in Shenzhen on June 9th 2023. They were advocating for the "N+1" severance package after Foxconn had announced a 5-day vacation commencing from the Dragon Boat Festival on June 22nd coupling it with reduction in regular working hours. The "N+1" compensation package is a standard severance package plus 1 month of pay meant to cover the lack of notice period.

Foxconn Reducing Manufacturing in China

The Shenzhen factory compound of Foxconn once employed more than 150,000 employees. Now only 30,000 employees remain and that number is also going down. It's common knowledge now that Apple has changed its supply chain to be less dependant of China. Apple and Foxconn as Apple's main manufacturing partner has been moving manufacturing to India and south-east Asia. Reducing of working hours in Guanlan factory is just the latest event in this scheme.

Problems to Economy

These reductions have already affected the local housing markets around the factories. Additionally the lot's of small businesses have either closed or moved elsewhere. Once bustling shopping malls in the district have become deserted and many malls have just boarded up the vacant storefronts.

Factory to Saudi Arabia?

Foxconn is in talks with Saudi Arabia to build a $9 billion factory in Neom. Neom is a tech-focused city-state Saudi Arabia is developing in the desert. The new factory could be manufacturing microchips, electric-vehicle components and other electronics. Foxconn is also in talks with the United Arab Emirates about possibly placing the new factory there.



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