New Fed Rule Limits Emergency Lending Power
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Janet Yellen is the Fed chairwoman. The five members of the Fed’s board on Monday voted to approve the new rule, which takes effect Jan. 1. CreditMichael Reynolds/European Pressphoto Agency
In the lead-up to the financial crisis of 2008, the Federal Reserve had the ability to make huge emergency loans to almost any entity it chose, a power it used to help save Wall Street firms from possible collapse.
Now, seven years later, the Fed, under the direction of Congress, has adopted a new rule that would place restrictions on its extraordinary financial powers. The restrictions, which stem from the Dodd-Frank Act of 2010, aim to ensure that the Fed’s emergency loans are not used to shore up insolvent firms.
The five members of the Fed’s board on Monday voted to approve the rule, which takes effect on Jan. 1…
New Fed Rule Limits Emergency Lending Power
