Macro Musings with David Beckworth
Kathryn Judge on the Importance of Emergency Lending Facilities at the Federal Reserve
Apr 21, 2025
56:03
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Quick takeaways
- The evolution of Section 13(3) highlights its increasing role in providing liquidity to both banks and non-bank entities during crises.
- Reforms post-Dodd-Frank aimed to enhance the Federal Reserve's transparency and accountability in emergency lending while preserving quick response capabilities.
Deep dives
Evolution of Section 13.3
Section 13.3 of the Federal Reserve Act, initially established during the Great Depression, evolved from a rarely used authority to a crucial tool for the Fed during financial crises. Originally intended to allow the Fed to provide liquidity not only to banks but also to non-bank financial institutions, its usage remained limited for decades. The paper highlights how 13.3 was invoked during the Great Financial Crisis of 2008 and saw increased implementation during the COVID-19 pandemic, reflecting its growing significance in the Fed's toolkit. This marked evolution underscores the changing nature of financial systems where non-banking entities now play an essential role alongside traditional banks.
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