Emerald logo
Advanced search

Establishing credible rules for Fed emergency lending

Charles W. Calomiris (Department of Finance and Economics, Columbia Business School, Columbia University, New York, New York, USA)
Douglas Holtz-Eakin (American Action Forum, Washington, DC, USA)
R. Glenn Hubbard (Columbia University, New York, New York, USA)
Allan H. Meltzer (Carnegie-Mellon University, Pittsburgh, Pennsylvania, USA)
Hal S. Scott (Harvard Law School, Harvard University, Cambridge, Massachusetts, USA)

Journal of Financial Economic Policy

ISSN: 1757-6385

Publication date: 7 August 2017

Abstract

Purpose

The purpose of this paper is to propose reforms that would establish a credible framework of rules to constrain and guide emergency lending by the Federal Reserve and by fiscal authorities during a future financial crisis.

Design/methodology/approach

The authors propose a set of five overarching rules, informed by history, empirical evidence and theory, which would serve as the foundation on which detailed legislation should be constructed.

Findings

The authors find that the current framework governing emergency lending – including reforms to Federal Reserve lending enacted after the recent crisis – is inadequate and not credible, and that their proposed framework would constitute a credible balancing of costs and benefits.

Practical implications

Adequate assistance to financial institutions would be provided in systemic crises but would be limited in its form, and by the process that would govern its provision.

Originality/value

This framework would serve as a basis for establishing effective rules that would be credible, and that would properly balance the moral-hazard costs of emergency lending against the gains from avoiding systemic collapse of the financial system.

Keywords

  • Central banking
  • Systemic risk
  • Dodd-Frank act
  • Federal reserve
  • Emergency lending
  • Bailouts
  • Lender of last resort
  • Moral hazard
  • E58
  • G28

Citation

Calomiris, C., Holtz-Eakin, D., Hubbard, R., Meltzer, A. and Scott, H. (2017), "Establishing credible rules for Fed emergency lending", Journal of Financial Economic Policy, Vol. 9 No. 3, pp. 260-267. https://doi.org/10.1108/JFEP-01-2017-0006

Download as .RIS

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
Login
To rent this content from Deepdyve, please click the button.
Rent from Deepdyve
If you would like to contact us about accessing this content, click the button and fill out the form.
Contact us
Emerald Publishing
  • Opens in new window
  • Opens in new window
  • Opens in new window
  • Opens in new window
© 2019 Emerald Publishing Limited

Services

  • Authors Opens in new window
  • Editors Opens in new window
  • Librarians Opens in new window
  • Researchers Opens in new window
  • Reviewers Opens in new window

About

  • About Emerald Opens in new window
  • Working for Emerald Opens in new window
  • Contact us Opens in new window
  • Publication Sitemap

Policies and information

  • Legal Opens in new window
  • Editorial policy Opens in new window & originality guidelines Opens in new window
  • Site policies
  • Modern Slavery Act Opens in new window

We’re listening — tell us what you think

  • Something didn’t work…

    Report bugs here

  • All feedback is valuable

    Please share your general feedback

  • Member of Emerald’s Library Advisory Network?

    You can start or join in a discussion here.
    If you’d like to know more about The Network, please email us

Join us on our journey

  • Platform update page

    Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

  • Frequently Asked Questions

    Your questions answered here