After todays rapid rise in Stock prices it is important to look at that this really means. The Federal Funds Rate is the interest rate that depository institutions lends immediately available funds (balances on deposit with the Federal Reserve Bank)to another depository institution overnight.
The Discount Window
In many respects the Discount window is an outdated function of the Fed, having long been replaced by the Open MarketThe Discount window functions as a safety valve in relieving pressures in reserve markets; in circumstances where extensions of credit can help relieve liquidity strains in the banking system, the window also helps to assure the basic stability of financial markets more generally.
Recently a number of large financial institutions, including, CitiGroup (the largest institution in terms of assets in the United States), BoA and Wachovia have all paid visits to the Discount Window. This represents a shift in the way Banks think and operate, for years most banks avoided the Discount Window, there was a stigma that this form of borrowing was reserved for distressed banks only, but that feeling is slowly beginning to change.
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