Should the Fed’s new BTFP also offer long-term maturities?

I am sure we are all concerned that regional banks, especially First Republic Bank ($FRC), are still struggling to meet liquidity needs, despite the Federal Reserve’s new Bank Term Funding Program (BTFP). I believe depositors and investors are not confident in the BTFP because liquidity support is only short-term (i.e. one-year loan maturities). If the Fed is serious about supporting regional banks, perhaps the BTFP should also offer long-term maturities. Struggling regional banks have a variety of short- and long-term durations in their bond portfolios, so offering only a one-year loan is insufficient to meet liquidity needs.

Depositors/investors are probably asking: “What happens after one year when the BTFP loans are due?”, which is why bank runs and stock price sell-offs have continued.

Furthermore, I am concerned that should the Fed not offer longer BTFP maturities, we can expect regional banks to be acquired by Structurally Important Banks (SIB), thus increasing concentration risk within the banking sector.

A bigger Fed balance sheet is less risky than banking concentration risk – especially at a time of significant interest rate/duration risk.

Also, the suggestion that all depositors should be insured may be a tall-order for the Fed – and would balloon their balance sheet at a time when they are attempting Quantitative Tightening (QT) to help fight inflation. Perhaps a more feasible solution is to offer the proposed long-term liquidity via longer BTFP maturities.

TL;DR: the Fed needs to do more, but what exactly? Insuring all depositors would potentially put the Fed on the hook for trillions of dollars and balloon their balance sheet. A more feasible alternative solution may be to offer both short- and long-term BTFP maturities for struggling regional banks.

DISCLOSURE: I own $FRC call options.