Journal Article
The political origins of Section 13(3) of the Federal Reserve Act
Sastry, Parinitha (2018)
At the height of the financial crisis of 2007-09, the Federal Reserve conducted emergency lending under authority granted to it in the third paragraph of Section 13 of the Federal Reserve Act. This article explores the political and legislative origins of the section, focusing on why Congress chose to endow the central bank with such an authority. The author describes how in the initial passage of the act in 1913, Congress demonstrated its steadfast commitment to the ?real bills? doctrine in two interrelated ways: 1) by limiting what assets the Fed could purchase, discount, and use as ...
Economic Policy Review , Issue 24-1 , Pages 1-33

Discussion Paper
Which Dealers Borrowed from the Fed’s Lender-of-Last-Resort Facilities?
Sarkar, Asani; Acharya, Viral V.; Hrung, Warren B.; Fleming, Michael J. (2017-05-10)
During the 2007-08 financial crisis, the Fed established lending facilities designed to improve market functioning by providing liquidity to nondepository financial institutions?the first lending targeted to this group since the 1930s. What was the financial condition of the dealers that borrowed from these facilities? Were they healthy institutions behaving opportunistically or were they genuinely distressed? In published research, we find that dealers in a weaker financial condition were more likely to participate than healthier ones and tended to borrow more. Our findings reinforce the ...
Liberty Street Economics , Paper 20170510

Report
Dealer financial conditions and lender-of-last resort facilities
Acharya, Viral V.; Fleming, Michael J.; Hrung, Warren B.; Sarkar, Asani (2014-05-01)
We examine the financial conditions of dealers that participated in two of the Federal Reserve?s lender-of-last-resort (LOLR) facilities--the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF)--that provided liquidity against a range of assets during 2008-09. Dealers with lower equity returns and greater leverage prior to borrowing from the facilities were more likely to participate in the programs, borrow more, and--in the case of the TSLF--at higher bidding rates. Dealers with less liquid collateral on their balance sheets before the facilities were ...
Staff Reports , Paper 673

Report
An investigation of the gains from commitment in monetary policy
Schaumburg, Ernst; Tambalotti, Andrea (2003-08-01)
This paper proposes a simple framework for analyzing a continuum of monetary policy rules characterized by differing degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment. The monetary policy authority is assumed to formulate optimal commitment plans, to be tempted to renege on them, and to succumb to this temptation with a constant exogenous probability known to the private sector. By interpreting this probability as a continuous measure of the (lack of) credibility of the monetary policy authority, we investigate the welfare effect ...
Staff Reports , Paper 171

Speech
The New Stone Soup
Daly, Mary C. (2020-02-10)
Remarks at the Iveagh House Lecture, Dublin, Ireland, by Mary C. Daly, President and CEO, Federal Reserve Bank of San Francisco, February 10, 2020.
Speech

Working Paper
Central Bank Digital Currency: Central Banking for All?
Sanches, Daniel R.; Uhlig, Harald F.; Fernandez-Villaverde, Jesus; Schilling, Linda (2020-06-01)
The introduction of a central bank digital currency (CBDC) allows the central bank to engage in large-scale intermediation by competing with private financial interme-diaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself, but relies on investment banks to do so. We derive an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. Dur-ing a panic, however, we show that the rigidity of the central bank’s contract ...
Working Papers , Paper 20-19

Journal Article
Is the Risk of the Lower Bound Reducing Inflation?
Amano, Robert; Carter, Thomas; Leduc, Sylvain (2020-02-24)
U.S. inflation has remained below the Fed’s 2% goal for over 10 years, averaging about 1.5%. One contributing factor may be the impact from a higher probability of future monetary policy being constrained by the effective lower bound on interest rates. Model simulations suggest that this higher risk of hitting the lower bound may lead to lower expectations for future inflation, which in turn reduces inflation compensation for investors. The higher risk may also change household and business spending and pricing behavior. Taken together, these effects contribute to weaker inflation.
FRBSF Economic Letter , Volume 2020 , Issue 05 , Pages 05

Journal Article
The New Stone Soup
Daly, Mary C. (2020-02-18)
Countries around the globe face slow growth, low real interest rates, and persistently low inflation. This makes economies less resilient and less able to offset everyday shocks with traditional tools. Policymakers must actively look for outside perspectives and be courageous enough to take action in times of uncertainty. The following is adapted from a speech by the president and CEO of the Federal Reserve Bank of San Francisco delivered as part of the Iveagh House Lectures at the Irish Department of Foreign Affairs and Trade in Dublin on February 10.
Economic Review , Volume 2020 , Issue 04 , Pages 07

Speech
The Federal Reserve’s Pandemic Response
Held, Michael (2020-06-25)
Remarks at Union of Arab Banks Webinar: Global Banking in Light of COVID-19 and Geopolitical Development (delivered via videoconference).
Speech