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The Fed's Playbook for Fighting Bank Panics, Now vs. The Great Depression | Dr. Jane Knodell

Forward Guidance

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The Systemic Risk Exception to the Federal Reserve Act

The FDIC has an exception to the rule that you have to do the least cost resolution. It says, if you declare a systemic risk, then you can close a bank in a way that is not the least cost way to close the bank. And that also covers uninsured depositors. If you cover the uninsured depositors, it's not the taxpayer who's going to pay for that. But even in the global financial crisis, the banks did not draw on their line of credit. They found a way to get the deposit insurance fund up from negative into positive territory without going to the taxpayers.

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