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The Recent Rise in Discount Window Borrowing

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Abstract

The Federal Reserve’s primary credit program—offered through its “discount window” (DW)—provides temporary short-term funding to fundamentally sound banks. Historically, loan activity has been low during normal times due to a variety of factors, including the DW’s status as a back-up source of liquidity with a relatively punitive interest rate, the stigma attached to DW borrowing from the central bank, and, since 2008, elevated levels of reserves in the banking system. However, beginning in 2022, DW borrowing under the primary credit program increased notably in comparison to past years. In this post, we examine the factors that may have contributed to this recent trend.

Suggested Citation

  • Helene Lee & Asani Sarkar, 2023. "The Recent Rise in Discount Window Borrowing," Liberty Street Economics 20230117, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:95481
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    More about this item

    Keywords

    discount window; stigma; borrowing; Federal Home Loan Banks (FHLBs); reserves; banks; pandemic; Lender of Last Resort; Federal Reserve;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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