Alert August 04, 2009

Proposed Legislation Revising the FRB’s Authority to Provide Emergency Funding under Section 13 of the Federal Reserve Act

The Treasury submitted proposed legislation to Congress that would amend the third paragraph of Section 13 of the Federal Reserve Act (the “FRA”) to place a restriction on the FRB’s currently almost unlimited authority to provide emergency funding through the FRB’s discount window to financial institutions (as well as other firms) under economic stress (i.e., a firm is “unable to secure adequate credit accommodations from other banking institutions”).

The proposed legislation would amend Section 13 of the FRA to require that the FRB obtain the prior written approval of the Secretary of the Treasury before extending any such funding.