When Ben Bernanke makes his pilgrimage to Capitol Hill Wednesday to present the Federal Reserve’s semi-annual monetary policy report to Congress, he will have one new strike against him: the increase in the discount rate. If he plays his cards right, he can turn a liability into an asset — especially if he follows a few basic pointers, which I’ll get to in a minute. Last week, the Fed raised the discount rate by 0.25 point to 0.75 percent and said the term of these direct loans to banks will revert to overnight next month from 28 days now. It left the benchmark overnight rate at 0 percent to 0.25 percent and invoked the “extended period” clause to assure markets that rate isn’t going up anytime soon. Before the crisis, the discount rate stood 100 basis points more than the federal funds rate, a reminder that borrowing at the Fed window is a privilege, albeit at a price. During the crisis, the Fed adopted a “come one, come all” policy, knowing access to Fed credit was essential to banks’ provision of private credit.
Bernanke Can Tell Congress He Stiffed the Banks: Caroline Baum
Most Popular Articles
Latest Articles
Did lower mortgage rates slow housing inventory growth?
After two weeks of significant increases, my model for inventory growth with higher mortgage rates came crashing down last week.
-
Labor market report is good news for mortgage rates
-
Virginia Realtors: Zillow’s touring agreement may not be legal
-
Low inventory creates challenging conditions in North Carolina’s housing market
-
Tri-state area housing shortage could cost the region economically
-
Remote reverse mortgage counseling now permanently permitted in Massachusetts