Washington U in St. Louis2014-07-10 3:04 PM

The Federal Reserve's Discount Window and TAF Programs: 'Pushing on a String?'

Abstract


The Federal Reserve injected unprecedented liquidity into banks during the crisis using the discount window and Term Auction Facility. We examine these facilities’ use and effectiveness. We find: small bank users were generally weak, large bank users were not; the funds substituted to a limited degree for other funds; these facilities increased aggregate lending which would have decreased in their absence. The funds enhanced lending of expanding banks and reduced the decline at contracting banks. Small banks increased small-firm lending, while large banks enhanced large-firm lending. Loan quality only improved at small banks, while both left loan contract terms unchanged.


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http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2429710

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Washington U in St. Louis

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