discount window investment & finance definition
Federal Reserve Bank’s lending facility through which a bank may borrow funds.
The Federal Reserve gives loans to banks for short-term needs such as keeping
sufficient reserves on deposit for overnight or over the weekend. Banks can
borrow funds at the Federal Reserve’s discount rate, which is a below-market
rate. The term derives its name from when Federal Reserve banks all had
teller’s windows and at least one of them was the discount window. Bankers
needing funds would bring their loans to their regional Federal Reserve Bank
for discounting, which is selling loans for less than face value. Later, they
would buy the loans back from the Federal Reserve at face value. The law has
been changed to let the Fed lend money through advances that are collateralized
by loans or securities.
See discount window in Wall Street Words
The lending facility of the Federal Reserve through which commercial banks borrow reserves. Federal Reserve policy toward supplying banks with reserves has a major effect on credit conditions and interest rates.
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