The Vulnerabilities of America's Banks and Silicon Valley's Collapse.

Deposits in American banks have fallen by half a trillion dollars over the past year, making the financial system more fragile. Money-market funds, which saw inflows of $121bn last week, are unable to take deposits, but instead, cash leaving a bank for a money-market fund is credited to the fund’s bank account, from which it is used to purchase the commercial paper or short-term debt in which the fund wants to invest. The Federal Reserve’s reverse-repo facility, introduced in 2013, may be having a profoundly destabilising impact on banks, as use of the facility has jumped in recent years, owing to vast quantitative easing during covid-19 and regulatory tweaks which left banks laden with cash.