The Resource The Fed, Liquidity, and Credit Allocation

The Fed, Liquidity, and Credit Allocation

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The Fed, Liquidity, and Credit Allocation
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The Fed, Liquidity, and Credit Allocation
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Summary
The current financial turmoil has generated considerable discussion of liquidity. Moreover, it has been widely reported that the Federal Reserve played a major role in supplying liquidity to financial markets during this distressed time. This article describes two ways in which the Fed has supplied liquidity since late 2007. The first is traditional: The Fed supplies liquidity by providing credit through open market operations and by lending to depository institutions at the so-called discount window. The second is by enhancing the liquidity of portfolios of some institutions by replacing their less-liquid assets with more-liquid assets. The Fed has used the second approach since late 2007. Unlike several previous occasions, however, it began supplying liquidity in the first, more traditional way only recently in September 2008. This article notes that the Fed departed from its long-standing tradition of minimizing its effect on the allocation of credit by supplying liquidity to institutions that it believed to be most in need, at the same time, it neutralized the effects of these actions on the total supply of liquidity in the financial market. The article also discusses the Fed's reasons for reallocating credit this time rather than simply increasing the total supply of financial market liquidity
http://library.link/vocab/creatorName
  • Thornton, Daniel L
  • Inter-university Consortium for Political and Social Research [distributor]
Label
The Fed, Liquidity, and Credit Allocation
Instantiates
Publication
Note
  • 1995-01-01--2008-11-30
  • 24563
Control code
ICPSR24563.v2
Governing access note
Access restricted to subscribing institutions
Label
The Fed, Liquidity, and Credit Allocation
Publication
Note
  • 1995-01-01--2008-11-30
  • 24563
Control code
ICPSR24563.v2
Governing access note
Access restricted to subscribing institutions

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