Briefing

Should the Fed Do Emergency Lending?


Abstract: In its 100-year history, many of the Federal Reserve's actions in the name of financial stability have come through emergency lending once financial crises are underway. It is not obvious that the Fed should be involved in emergency lending, however, since expectations of such lending can increase the likelihood of crises. Arguments in favor of this role often misread history. Instead, history and experience suggest that the Fed's balance sheet activities should be restricted to the conduct of monetary policy.

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2014

Issue: July