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The new discount window

Author

Listed:
  • Edward J. Stevens

Abstract

New regulations will change the way credit is rationed at the Federal Reserve's discount window. The Reserve Banks used to charge a below-market discount rate and rely on loan officers to restrict access to loans. Under the new system, the discount rate normally will be significantly higher than market rates, but loans will be available to any sound institution (which means most) at its discretion. This new arrangement eliminates any perception of a subsidy at the discount window. It also should prevent the actual fed funds rate from exceeding the discount rate so long as depository institutions feel free to borrow at the window.

Suggested Citation

  • Edward J. Stevens, 2003. "The new discount window," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    • Handle: RePEc:fip:fedcec:y:2003:i:may15
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    File URL: https://www.clevelandfed.org/-/media/project/clevelandfedtenant/clevelandfedsite/publications/economic-commentary/2003/ec-20030515-the-new-discount-window-pdf.pdf
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    Cited by:

    1. repec:fip:a00001:94154 is not listed on IDEAS
    2. Larry D. Wall, 2021. "So Far, So Good: Government Insurance of Financial Sector Tail Risk," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2021(13), November.

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    Keywords

    Discount window;

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