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The Fed, Changing Roles in Wake of Crisis

American Banker

Peter Peyser, a principal at Blank Rome Government Relations LLC, recently spoke with American Banker  regarding the new trend in banks:  to borrow from the Federal Reserve Board’s discount window.  The stigma attached to banks borrowing from the Federal Reserve Board's discount window has vanished in recent weeks—and may be gone for good. 

Mr. Peyser said, "I don't see us going back to the day when the discount window is a place that banks are going to avoid at all costs".

Mr. Peyser also commented on the Fed taking on a new role as a routine source of funding instead of a “lender of last resort”.  Although this raises many concerns, Mr. Peyser said many public policy matters are being ignored as the Fed and other regulators focus on the problems of the day.

"A lot of public policy questions have been put aside in this crisis atmosphere," he said. "The public policy imperative became preventing a collapse of the financial system. The niceties of the central bank's role in corporate finance in the banking sector doesn't get discussed."

“Going to the Window with No Apologies” by Steven Sloan appeared in American Banker on October 27, 2008.  For more information, please visit www.bankinvestmentconsultant.com.