Abstract

http://ssrn.com/abstract=2429710
 
 

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


Allen N. Berger


University of South Carolina - Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Lamont K Black


DePaul University - Driehaus College of Business

Christa H. S. Bouwman


Texas A&M University; Wharton Financial Institutions Center

Jennifer Dlugosz


Washington University in Saint Louis - John M. Olin Business School

October 13, 2014


Abstract:     
The Federal Reserve injected unprecedented liquidity into banks during the recent financial crisis using the discount window and Term Auction Facility. Our examination of these facilities’ use and effectiveness leads to three main findings. First, small bank users were generally weak, whereas large bank users were not, contrary to the Lender of Last Resort theory that weak banks are more likely to use funds. Second, the funds were more of a substitute for than a complement to other funding sources, although the degree of substitution was limited. Third, 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.

Number of Pages in PDF File: 69

Keywords: Banks, Discount Window, Term Auction Facility, Central Bank, Lending

JEL Classification: G21, G28, E58

working papers series





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Date posted: April 28, 2014 ; Last revised: October 15, 2014

Suggested Citation

Berger, Allen N. and Black, Lamont K and Bouwman, Christa H. S. and Dlugosz, Jennifer, The Federal Reserve's Discount Window and TAF Programs: 'Pushing on a String?' (October 13, 2014). Available at SSRN: http://ssrn.com/abstract=2429710 or http://dx.doi.org/10.2139/ssrn.2429710

Contact Information

Allen N. Berger
University of South Carolina - Moore School of Business ( email )
1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)
Wharton Financial Institutions Center
Philadelphia, PA 19104-6367
United States
European Banking Center
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Lamont K Black
DePaul University - Driehaus College of Business ( email )
1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
312-362-5617 (Phone)
312-362-6566 (Fax)
HOME PAGE: http://driehaus.depaul.edu/faculty-and-staff/faculty/Pages/black-lamont.aspx
Christa H. S. Bouwman (Contact Author)
Texas A&M University ( email )
360H Wehner
College Station, TX 77843-4218
United States
979-845-3514 (Phone)
979-845-3514 (Fax)
HOME PAGE: http://people.tamu.edu/~cbouwman/
Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
Jennifer Dlugosz
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
Feedback to SSRN


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