The Federal Reserve: The Weakest Lender of Last Resort Among its Peers 

Posted: 5 Dec 2015

Date Written: December 2, 2015

Abstract

This article for the first time compares the Federal Reserve's powers as lender of last resort (‘LLR’) and its ability to fight contagion, with its three major peers, the Bank of England (the ‘BOE’), the European Central Bank (the ‘ECB’) and the Bank of Japan (the ‘BOJ’). It concludes that the Federal Reserve (the ‘Fed’) is currently the weakest of the four, largely due to a hostile political environment for LLR powers, which are equated with bailouts, and restrictions placed by the 2010 Dodd–Frank Act on the Fed's ability to loan to non-banks, whose role in the financial system is ever-increasing. This is a concern for the global as well as the US financial system, given the economic importance of the United States and the use of the dollar as a reserve currency.

Suggested Citation

Scott, Hal S., The Federal Reserve: The Weakest Lender of Last Resort Among its Peers  (December 2, 2015). Available at SSRN: https://ssrn.com/abstract=2698399

Hal S. Scott (Contact Author)

Harvard Law School ( email )

1557 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-4590 (Phone)
617-495-9593 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
158
PlumX Metrics