Why Banks Are Suddenly Borrowing From the Fed's Discount Window

Odd Lots

Bloomberg

News, Investing, Business, News Commentary, Business News

4.4 • 1.6K Ratings

🗓️ 13 January 2023

⏱️ 43 minutes

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Summary

The discount window at the Federal Reserve allows banks to borrow money at an above-market rate in exchange for high-quality collateral. The facility is always available to use, but typically nobody does. Not only is the borrowing costlier, there's also a "stigma" associated with its usage, since the perception is that if you use it your institution might be in some kind of financial distress. So why has some entity (or multiple entities) been using it lately? On this episode of the podcast, we speak with Bill Nelson, chief economist at the Bank Policy Institute and a former employee of the Federal Reserve who helped design and manage the discount window for 10 years. We discuss what the program is, its history and how it's used today.

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0:41.5	This is Lisa Brahmowitz here to tell you about another podcast we think you'll enjoy listening to.
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1:21.5	Hello and welcome to another episode of The Odd Lots Podcast. I'm Tracy Alloway.
1:26.3	And I'm Joe Wiesenthal.
1:27.9	Joe, do you remember the discount window?
1:31.1	Yeah. The only thing I know about the discount window is that it's some way for the banks to borrow
	...

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