Discussion Paper

The Recent Rise in Discount Window Borrowing

Abstract: The Federal Reserve’s primary credit program—offered through its “discount window” (DW)—provides temporary short-term funding to fundamentally sound banks. Historically, loan activity has been low during normal times due to a variety of factors, including the DW’s status as a back-up source of liquidity with a relatively punitive interest rate, the stigma attached to DW borrowing from the central bank, and, since 2008, elevated levels of reserves in the banking system. However, beginning in 2022, DW borrowing under the primary credit program increased notably in comparison to past years. In this post, we examine the factors that may have contributed to this recent trend.

Keywords: discount window; stigma; borrowing; Federal Home Loan Banks (FHLBs); reserves; banks; pandemic; Lender of Last Resort; Federal Reserve;

JEL Classification: E5; G2;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2023-01-17

Number: 20230117