Jump to ContentJump to Main Navigation
Connectedness and ContagionProtecting the Financial System from Panics$
Users without a subscription are not able to see the full content.

Hal S. Scott

Print publication date: 2016

Print ISBN-13: 9780262034371

Published to MIT Press Scholarship Online: January 2017

DOI: 10.7551/mitpress/9780262034371.001.0001

Show Summary Details
Page of

PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 24 May 2022

Dodd–Frank Restrictions on the Lender-of-Last-Resort Power

Dodd–Frank Restrictions on the Lender-of-Last-Resort Power

(p.93) 9 Dodd–Frank Restrictions on the Lender-of-Last-Resort Power
Connectedness and Contagion

Hal S. Scott

The MIT Press

The Dodd–Frank Act placed important restrictions on the Fed's power as lender of last resort (LLR) to nonbanks under §13(3) as part of the post-crisis reaction that its lending constituted an undesirable bailout of “Wall Street.” This chapter details these restrictions, which have substantially curtailed the Fed's ability to be an effective LLR in a future crisis, and have made the financial system much less stable. The following restrictions were placed on the Fed: (1) no loans can be made to single institutions—they must be part of a broad program approved by the Secretary of the Treasury; (2) all nonbank loans must be approved by the Secretary of the Treasury; (3) loans can only be made to solvent institutions; (4) discount window loans to banks cannot be used to fund their nonbank affiliates, like broker-dealers–instead loans to those affiliates must be authorized under §13(3); (5) new collateral requirements are imposed; and (6) all loans must be publicly disclosed within one year, and disclosed to congressional leaders in seven days.

Keywords:   Dodd–Frank Act, Federal Reserve, financial policy, lender of last resort, loans, monetary policy

MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.