The Federal Reserve Discount Window: Administration in the Fifth District

1961 ◽  
Vol 28 (1) ◽  
pp. 101
Author(s):  
Clifton H. Kreps ◽  
George W. McKinney
Keyword(s):  
Federal Reserve ◽  
Discount Window

Overcoming Discount Window Stigma: An Experimental Investigation

2020 ◽  
Vol 33 (12) ◽  
pp. 5630-5659 ◽  
Author(s):  
Olivier Armantier ◽  
Charles A Holt
Keyword(s):  
Experimental Investigation ◽  
Adverse Selection ◽  
Federal Reserve ◽  
Financial Stability ◽  
Coordination Game ◽  
Lender Of Last Resort ◽  
Discount Window

Abstract A core responsibility of the Federal Reserve is to ensure financial stability by acting as the “lender of last resort” through its discount window (DW). Historically, however, the DW has not been effective because its usage is stigmatized. In this paper, we develop a coordination game with adverse selection, and we test in the lab policies that have been proposed to mitigate DW stigma. We find that lowering the DW cost and making DW borrowing difficult to detect are ineffective, but regular random DW borrowing can overcome DW stigma. Implications for other forms of stigma in finance are discussed.

scholarly journals The Federal Reserve and Panic Prevention: The Roles of Financial Regulation and Lender of Last Resort

2013 ◽  
Vol 27 (4) ◽  
pp. 45-64 ◽  
Author(s):  
Gary Gorton ◽  
Andrew Metrick
Keyword(s):  
Federal Reserve ◽  
Financial Regulation ◽  
Institutional Design ◽  
Regulatory System ◽  
Lender Of Last Resort ◽  
The Great Depression ◽  
Board Of Governors ◽  
Discount Window ◽  
Banking Panics ◽  
Panic Prevention

This paper surveys the role of the Federal Reserve within the financial regulatory system, with particular attention to the interaction of the Fed's role as both a supervisor and a lender-of-last-resort. The institutional design of the Federal Reserve System was aimed at preventing banking panics, primarily due to the permanent presence of the discount window. This new system was successful at preventing a panic in the early 1920s, after which the Fed began to discourage the use of the discount window and intentionally create “stigma” for window borrowing—policies that contributed to the panics of the Great Depression. The legislation of the New Deal era centralized Fed power in the Board of Governors, and over the next 75 years the Fed expanded its role as a supervisor of the largest banks. Nevertheless, prior to the recent crisis the Fed had large gaps in its authority as a supervisor and as lender of last resort, with the latter role weakened further by stigma. The Fed was unable to prevent the recent crisis, during which its lender of last resort function expanded significantly. As the Fed begins its second century, there are still great challenges to fulfilling its original intention of panic prevention.

scholarly journals The Federal Reserve Discount Window.

1961 ◽  
Vol 16 (3) ◽  
pp. 459
Author(s):  
Katherine Finney ◽  
George W. McKinney
Keyword(s):  
Federal Reserve ◽  
Discount Window

The Priority of Democracy

2011 ◽  
Author(s):  
Jack Knight ◽  
James Johnson
Keyword(s):  
Decision Making ◽  
Monetary Policy ◽  
Political Institutions ◽  
Federal Reserve ◽  
Democratic Politics ◽  
Institutional Choice ◽  
Democratic Process ◽  
Strong Case ◽  
The Subject ◽  
The Relationship

Pragmatism and its consequences are central issues in American politics today, yet scholars rarely examine in detail the relationship between pragmatism and politics. This book systematically explores the subject and makes a strong case for adopting a pragmatist approach to democratic politics—and for giving priority to democracy in the process of selecting and reforming political institutions. What is the primary value of democracy? When should we make decisions democratically and when should we rely on markets? And when should we accept the decisions of unelected officials, such as judges or bureaucrats? This book explores how a commitment to pragmatism should affect our answers to such important questions. It concludes that democracy is a good way of determining how these kinds of decisions should be made—even if what the democratic process determines is that not all decisions should be made democratically. So, for example, the democratically elected U.S. Congress may legitimately remove monetary policy from democratic decision-making by putting it under the control of the Federal Reserve. This book argues that pragmatism offers an original and compelling justification of democracy in terms of the unique contributions democratic institutions can make to processes of institutional choice. This focus highlights the important role that democracy plays, not in achieving consensus or commonality, but rather in addressing conflicts. Indeed, the book suggest that democratic politics is perhaps best seen less as a way of reaching consensus or agreement than as a way of structuring the terms of persistent disagreement.

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