Under previous policy, the Fed would lend only against the market value of an asset. The FMV of a long-term bond declines when interest rates increase, so that

Under previous policy, the Fed would lend only against the market value of an asset. The FMV of a long-term bond declines when interest rates increase, so that didn't help. This is roughly how the SVB failed. Under new policy, for the next year, the Fed will lend against the par value of certain assets purchased before the crisis. That's an undercollateralized loan, so it's a subsidy to banks that took excessive interest rate risks. Those banks are still worse off than if they hadn't taken that risk though, since the interest cost of the loan is greater than the interest paid by the asset. This policy change has no direct cost to the public if the loans are repaid. If a bank gets such a loan and then fails anyways, some losses will be socialized. https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...