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Jel Classification:N22 

Working Paper
A New Daily Federal Funds Rate Series and History of the Federal Funds Market, 1928-1954

This article describes the origins and development of the federal funds market from its inception in the 1920s to the early 1950s. We present a newly digitized daily data series on the federal funds rate from April 1928 through June 1954. We compare the behavior of the funds rate with other money market interest rates and the Federal Reserve discount rate. Our federal funds rate series will enhance the ability of researchers to study an eventful period in U.S. financial history and to better understand how monetary policy was transmitted to banking and financial markets. For the 1920s and ...
Finance and Economics Discussion Series , Paper 2020-059

Report
The first debt ceiling crisis

In the second half of 1953 the United States, for the first time, risked exceeding the statutory limit on Treasury debt. This paper describes how Congress, the White House, and Treasury officials dealt with the looming crisis?by deferring and reducing expenditures, monetizing ?free? gold that remained from the devaluation of the dollar in 1934, and, ultimately, raising the debt ceiling.
Staff Reports , Paper 783

Report
Auctions implemented by the Federal Reserve Bank of New York during the Great Recession

During the Great Recession, the Federal Reserve implemented several novel programs to address adverse conditions in financial markets. Three of these temporary programs relied on an auction mechanism: the Term Auction Facility, the Term Securities Lending Facility, and the disposition of the Maiden Lane II portfolio. These auctions differed from one another in several dimensions: their objectives, rules, and the financial asset being traded. The object of this paper is to document, compare, and provide a rationale for the mechanics of the different auctions implemented by the Federal Reserve ...
Staff Reports , Paper 635

Report
Beyond thirty: Treasury issuance of long-term bonds from 1953 to 1965

Ever since the emergence of regular and predictable issuance of coupon-bearing Treasury debt in the 1970s, thirty years has marked the outer boundary of Treasury bond maturities. However, longer-term bonds were not unknown in earlier years. Seven such bonds, including one with a forty-year term, were issued between 1955 and 1963. This paper examines the circumstances that led to the issuance of these seven bonds.
Staff Reports , Paper 806

Report
Reducing moral hazard at the expense of market discipline: the effectiveness of double liability before and during the Great Depression

Prior to the Great Depression, regulators imposed double liability on bank shareholders to ensure financial stability and protect depositors. Under double liability, shareholders of failing banks lost their initial investment and had to pay up to the par value of the stock in order to compensate depositors. We examine whether double liability was effective at mitigating bank risks and providing a safety net for depositors before and during the Great Depression. We first develop a model that demonstrates two competing effects of double liability: a direct effect that constrains bank risk ...
Staff Reports , Paper 869

Report
The Treasury Market Practices Group: creation and early initiatives

Modern money and capital markets are not free-form bazaars where participants are left alone to contract as they choose, but rather are circumscribed by a variety of statutes, regulations, and behavioral norms. This paper examines the circumstances surrounding the introduction of a set of norms recommended by the Treasury Market Practices Group (TMPG) and pertinent to trading in U.S. government securities. The TMPG is a voluntary association of market participants that does not have any direct or indirect statutory authority; its recommendations do not have the force of law. The ...
Staff Reports , Paper 822

Report
Federal Reserve Participation in Public Treasury Offerings

This paper describes the evolution of Federal Reserve participation in public Treasury offerings. It covers the pre-1935 period, when the Fed participated on an equal footing with other investors in exchange offerings priced by Treasury officials, to its present-day practice of reinvesting the proceeds of maturing securities with “add-ons” priced in public auctions in which the Fed does not participate. The paper describes how the Federal Reserve System adapted its operating procedures to comply with the 1935 limitations on its Treasury purchases, how it modified its operating procedures ...
Staff Reports , Paper 906

Report
Information Management in Times of Crisis

How does information management and control affect bank stability? Following a national bank holiday in 1933, New York state bank regulators suspended the publication of balance sheets of state-charter banks for two years, whereas the national-charter bank regulator did not. We use this divergence in policies to examine how the suspension of bank-specific information affected depositors. We find that state-charter banks experienced significantly less deposit outflows than national-charter banks in 1933. However, the behavior of bank deposits across both types of banks converged in 1934 after ...
Staff Reports , Paper 907

Report
Managing the Treasury Yield Curve in the 1940s

This paper examines the efforts of the Federal Open Market Committee (FOMC) to first control, and later decontrol, the level and shape of the Treasury yield curve in the 1940s. The paper begins with a brief review of monetary policy in 1938 and a description of the period between September 1939 and December 1941, when the idea of maintaining a fixed yield curve first appeared. It then discusses the financing of U.S. participation in World War II and the experience with maintaining a fixed curve. The paper concludes with a discussion of how the FOMC regained control of monetary policy in the ...
Staff Reports , Paper 913

Report
The Effect of the Central Bank Liquidity Support during Pandemics: Evidence from the 1918 Influenza Pandemic

The coronavirus outbreak raises the question of how central bank liquidity support affects financial stability and promotes economic recovery. Using newly assembled data on cross-county flu mortality rates and state-charter bank balance sheets in New York State, we investigate the effects of the 1918 influenza pandemic on the banking system and the role of the Federal Reserve during the pandemic. We find that banks located in more severely affected areas experienced deposit withdrawals. Banks that were members of the Federal Reserve System were able to access central bank liquidity, enabling ...
Staff Reports , Paper 928

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