Why Did U.S. Branches of Foreign Banks Borrow at the Discount Window during the Crisis?

Linda Goldberg and David Skeie

No 20110413, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: To help contain the economic damage caused by the recent financial crisis, the Federal Reserve extended large amounts of liquidity to financial firms through traditional lending facilities such as the discount window as well as through newly designed facilities. Recently released Federal Reserve data on discount window borrowing show that some U.S. branches and agencies of foreign banks were among the most active users of the window. In this post, we explain why U.S. branches borrow at the discount window. We also discuss two main reasons why these branches had a large need for dollars during the crisis and how discount window loans to them helped stabilize the financial system and the real economy in the United States.

Keywords: currency mismatch; discount window; foreign banking organizations; wholesale funding (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2011-04-13
New Economics Papers: this item is included in nep-mac and nep-mon
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