On Aug 17, 2007, at 9:06 AM, Michael Pollak wrote:
> I only have one question: am I just inexperienced in reading Fed news
> releases, or has there been an unusual emphasis on the discount
> window in
> the last two notices? Does this mark a change and return to earlier
> practice? My impression was that over the last couple of decades the
> discount window had become largely vestigial -- that no bank wanted to
> borrow from it because it would stigmatize it as troubled, and that
> its
> only remaining function was as a subtle sender of signals as to future
> tightening or loosening. But in these last few announcements, it
> sounds
> like they actually mean for it to be used, as a substantial
> alternative to
> lowering rates.
Yeah, it seems that way. You didn't hear about the discount window for a long time, and while I'm certainly no professional Fed watcher, I don't remember any move like this one. Some talking head on CNBC just described the move as a "surgical strike" rather than a "carpet bombing" - you know what he was getting at, but the metaphor is weird, perhaps unintentionally venting some unconscious hostility towards the financial markets.
I think the message was "we'll bail out anyone in serious trouble, but we don't want to give everyone a free pass."
Doug