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As dollar woes get worse, why don't the Fed's swap lines work? Let's answer that question.

Eurodollar University

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The Discount Window in the Federal Funds Market

In April of 2008, there seemed to be almost two money markets in New York. European banks who normally conducted their business back and forth between Europe and New York would be paying higher rates in the morning. And then as the European banks drifted off for the evenings and into beyond, the nighttime beyond, exclusively American banks would then be transacting in federal funds at much softer rates. Not enough in the morning, too much in the afternoon. It reflected the latter and not the former.

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