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The Federal Reserve: The Weakest Lender of Last Resort Among Its Peers
Author(s) -
Scott Hal S.
Publication year - 2015
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/infi.12075
Subject(s) - lender of last resort , liberian dollar , currency , economics , loan , us dollar , financial system , quantitative easing , reserve requirement , monetary reform , financial crisis , finance , monetary economics , business , central bank , monetary policy , macroeconomics
This article for the first time compares the Federal Reserve's powers as lender of last resort (‘LLR’) and its ability to fight contagion, with its three major peers, the Bank of England (the ‘BOE’), the European Central Bank (the ‘ECB’) and the Bank of Japan (the ‘BOJ’). It concludes that the Federal Reserve (the ‘Fed’) is currently the weakest of the four, largely due to a hostile political environment for LLR powers, which are equated with bailouts, and restrictions placed by the 2010 Dodd–Frank Act on the Fed's ability to loan to non‐banks, whose role in the financial system is ever‐increasing. This is a concern for the global as well as the US financial system, given the economic importance of the United States and the use of the dollar as a reserve currency.