Macro Musings with David Beckworth cover image

Bill Nelson on the Fed’s Discount Window Lending, the Overnight Reverse Repo Facility, and the Shifting Size of the Fed’s Balance Sheet

Macro Musings with David Beckworth

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The Fed's Lending to Bridge Banks

There are legal restrictions on the Fed's ability to lend under its normal authority to under capitalized institutions they were put in place under the FDIC improvement of the act in 1991 because people thought that the Fed had maybe raised costs to the FDIC by lending to troubled institutions. So then it raises the question of do these loans fall under those those fiduciary restrictions that's unknown and I don't know if they ever will well this could have been a lot of creative legal thinking here as far as I know the Fed has not lent to a bridge bank before but it's hard to prove a negative.

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