– Cash borrowed directly from the Fed
– Discount rate (currently at 2.50%) is set by the Fed
– Usually a percentage point above fed funds rate
– Collateralized overnight loan
– Generally little volume (less than $300 million each day)
– Considered the lending of last resort
– Since it’s the loan of last resort, institutions are often stigmatized if they use this
– Influences the prime rate and Libor
Links:
Discount Window Borrowings of Depository Institutions from the Federal Reserve
Interest Rates, Discount Rate for United States
Federal discount rate
Federal Reserve Discount Rate