CHAPTER 6 Further Issues in Bank Lending
“A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.”
Mark Twain
Glossary of Terms
Discount Window: A facility, often referred to as lender of last resort, where banks can borrow short term from the Federal Reserve to meet their liquidity needs, normally using Treasury securities as collateral. The interest rate charged for these advances, a tool of monetary policy, is called the “discount rate.”
Open Market Operations: Purchases and sales of government securities by the Federal Reserve to adjust the legal reserves available to banks to support their deposit liabilities. Sales of government securities to banks reduce the reserves ...
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