Suppose a major bank needs to borrow $20 billion overnight that it cannot obtain from private creditors.

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Suppose a major bank needs to borrow $20 billion overnight that it cannot obtain from private creditors. The Fed is willing to make a discount loan of $20 billion provided that it will not alter interbank lending rates. How can it do so?

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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Question Posted: Oct 02, 2014 08:12 AM

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Suppose a major bank needs to borrow $20 billion overnight that it cannot obtain from private creditors.

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The Fed can make the 20 billion loan to the problem bank if it simultaneously sells 20 ...View the full answer

Money Banking and Financial Markets

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