What Is the Fed Discount Window and Why Are Banks Using It So Much?

The traditional role of central banks is to be a lender of last resort, and the traditional means by which the US Federal Reserve provides this backstop to the financial system is through what’s known as the discount window. In the tumultuous week ending March 15, banks borrowed $152.85 billion through the discount window, up from $4.58 billion the week before. The previous record was $111 billion, a mark reached during the 2008 financial crisis. Here’s what to know.

It’s the main direct lending facility provided by the Fed to support stability and provide liquidity to the US banking system. It enables the central bank to lend banks money for up to 90 days. While the service is always there, it’s particularly popular at moments of institutional or market stress when getting funds from elsewhere is proving difficult. The banks get the cash in return for providing collateral — securities like government bonds — that the central bank can keep if the loan isn’t repaid.