Word: rediscount
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When asked whether he thought that member banks were going to rediscount regularly with the Federal Reserve Bank or were doing it merely as an emergency measure, Professor Sprague replied that that could not be definitely said. "At present the Federal Reserve Banks are ready to meet variation in the reserves of the member banks due to changes day by day in their positions, as shown by settlements made with the other member banks in the clearing house. The aggregate of New York banks may be doing it steadily, but it usually fluctuates between different banks. It cannot be said...
...employ an Irish bull, the chief event of last week was one that didn't happen. Despite rumors in and out of Wall Street, the meeting of Governors of Federal Reserve Banks in Washington adjourned without proposing an advance in rediscount rates...
...confident but mistaken predictions that rediscount rates would be increased have proceeded partly from advocates of the classical theory that rediscount rates should stand above open market rates, and partly from apprehensive speculators in a temporarily bear stock market. The opinion of the latter group can be disregarded. But that of the former is entitled to genuine consideration. Undoubtedly as a general thing the bank rate should be above the market rate, and undoubtedly just the opposite is the case today. It may be that the Reserve authorities' decision to leave rates unchanged has been to some extent shaped...
...Treasury has been opposed to a rise in rediscount rates, since such an occurrence would be detrimental to government financing which will be in process until May 20 at the maturity of the Victory Notes. Higher rediscount rates meanwhile would increase the cost of such government financing...
Moreover, member banks are now increasing their mercantile loans by selling bonds rather than by rediscounting. In general, there is very little rediscounted paper in the Reserve banks, despite the current trade expansion. Several Reserve banks could not pay their running expenses today simply on interest accruing on their portfolio of bills and paper. Theoretically they should if necessary run at a loss in such cases; but this has been made impossible by the unjustifiable amounts of money taken from them by the government under the terms of the Reserve Act in 1919-21, under the euphemism of "franchise taxes...