Federal Reserve Chair Janet Yellen said she wouldn’t rule out expanding access to the central bank’s discount window to broker-dealers and other non-banks under certain circumstances during a financial crisis.
“It depends what the circumstances are,” Yellen said today in response to questions from the House Financial Services Committee during her semi-annual testimony. “A broad- based scheme in a situation of systemic risk is a possibility but it is something that would have to be very serious to consider.”
Responding to Representative Scott Garrett, a New Jersey Republican sponsoring a bill to require the Financial Stability Oversight Council to hold open meetings, Yellen said the circumstances would have to be “unusual and exigent,” citing the terms used in Section 13.3 of the Federal Reserve Act.
“Under the terms of the Dodd-Frank Act, the Federal Reserve is barred from extending discount window lending to an individual firm and we are confined to broad-based facilities,” Yellen said.
Lending to broker-dealers may be possible “if there were a general financial disruption and we were in a situation of systemic risk similar to what we saw during the financial crisis where we have a general panic.”
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