81 billion worth of loans under its peso rediscount
facility as of end-February this year, significantly higher compared to only P11 million same time in 2017.
The original act had stated that Fed Banks were "to furnish an elastic currency," which meant that they would rediscount commercial paper of member banks that wanted to convert deposits into currency--"form elasticity"--so as to prevent undue change in the total quantity of money.
First, on the affirmative (majority) vote of five members, it could "require Federal reserve banks to rediscount the discounted paper of other Federal reserve banks at rates of interest to be fixed by the Board of Governors.
The ratios of securities to assets, loans to assets, and rediscounts to assets all match White (1984).
Rediscounts were often short-term and carried high interest rates.
In June 1919, by contrast, discount loans totaled $1818 million; of these, 87 percent represented rediscounts of, or advances against, U.
To perform that role, Federal Reserve Banks were given a lending facility--their discount windows--through which they would rediscount eligible financial assets for member commercial banks in exchange for currency or reserve deposit balances.
In addition, to be eligible for rediscount, agricultural paper could have a maturity of no more than six months, whereas nonagricultural paper had to mature in 90 days or less.
As a result, "[a]fter 1937 the Federal Reserve practically ceased to buy or rediscount
such paper" until after World War II.
Hamlin promised to try to get the board to either force the two back to purchase or rediscount
for New York.
Instead of concentrating on the money stock, the price level, and other indicators featured in the quantity theory, the Fed focused on such measures as the level of market interest rates, the volume of member bank borrowing, and the type and amount of commercial paper eligible for rediscount at the central bank.
Consequently, the second stage saw Fed officials in the period 1919-1922 correct those omissions by incorporating into the doctrine a representation of the central bank's rediscount function.