Macro Musings with David Beckworth Kathryn Judge on the Importance of Emergency Lending Facilities at the Federal Reserve
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Apr 21, 2025 AI Snips
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Rising Role of Section 13.3
- Section 13.3 allows the Fed to provide collateralized loans to non-banks in unusual and exigent circumstances.
- Its use has increased dramatically since 2008 due to a complex, interconnected financial system with significant non-bank participants.
New Financial System Fragility
- The financial system now features important non-bank intermediaries requiring Fed support beyond banks.
- The growing complexity and fragility suggest recurrent shocks may necessitate frequent emergency Fed interventions via 13.3.
Make Discount Window More Accessible
- Strengthen the discount window to ensure banks use it more frequently and reduce reliance on emergency facilities.
- Improve access and collateral treatment to make it a standard, operational liquidity tool for banks.