The Federal Reserve's Discount Window and TAF Programs: 'Pushing on a String?'
Allen N. Berger
University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center
Lamont K. Black
DePaul University - Driehaus College of Business; Center for Financial Services
Christa H. S. Bouwman
Texas A&M University; Wharton Financial Institutions Center
Washington University in Saint Louis - John M. Olin Business School
January 20, 2017
The Federal Reserve injected unprecedented liquidity into banks during the recent crisis through the discount window and Term Auction Facility. We examine the use and effectiveness of these facilities and have three main findings. First, users were generally not weaker than other banks. Second, the funds were mostly weak substitutes for other funding sources. Third, these facilities increased lending, enhancing lending at expanding banks and reducing declines at contracting banks. Small banks increased small business lending and large banks enhanced large business lending. Loan quality only improved at small banks, while both size classes left loan contract terms unchanged.
Number of Pages in PDF File: 65
Keywords: Banks, Discount Window, Term Auction Facility, Central Bank, Lending
JEL Classification: G21, G28, E58
Date posted: April 28, 2014 ; Last revised: January 22, 2017