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Continue reading "Is Stigma Attached to the European Central Bank’s Marginal Lending Facility?" »
Continue reading "Which Dealers Borrowed from the Fed’s Lender-of-Last-Resort Facilities?" »
James Narron and David Skeie
As we observed in our last post on the Continental Currency Crisis, the finances of the United States remained chaotic through the 1780s as the young government moved to establish its credit. U.S. Congress was finally given the power of taxation in 1787 and, in 1789, Alexander Hamilton was appointed as the first Secretary of the Treasury. Hamilton moved quickly to begin paying off war debts and to establish a national bank—the Bank of the United States. But in 1791, a burst of financial speculation in subscription rights to shares in the new bank caused a tangential rally and fall in public debt securities prices. In this edition of Crisis Chronicles, we describe how Hamilton invented central bank crisis management techniques eight decades before Walter Bagehot described them in Lombard Street.
Continue reading "How Liquidity Standards Can Improve Lending of Last Resort Policies" »
Continue reading "Uncertainty, Liquidity Hoarding, and Financial Crises" »
Continue reading "Just Released: Chairman Bernanke Returns to His Academic Roots, Part 2" »
João A.C. Santos and Stavros Peristiani
Though not literally a window any longer, the “discount window” refers to the facilities that central banks, acting as lender of last resort, use to provide liquidity to commercial banks. While the need for a discount window and lender of last resort has been debated, the basic rationale for their existence is that circumstances can arise, such as bank runs and panics, when even fundamentally sound banks cannot raise liquidity on short notice. Massive discount window borrowing in the immediate aftermath of the September 11 terrorist attack on the United States clearly illustrates the importance of a discount window even in a modern economy. In this post, we discuss the classical rationale for the discount window, some debate surrounding it, and the challenges that the “stigma” associated with borrowing at the discount window poses for the effectiveness of the discount window.
Continue reading "Why Do Central Banks Have Discount Windows?" »
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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