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From Fire Hose To Garden Hose: Section 13(3) Of The Federal Reserve Act, Christian A. Johnson
From Fire Hose To Garden Hose: Section 13(3) Of The Federal Reserve Act, Christian A. Johnson
Christian A. Johnson
At the height of the Great Financial Crisis, the Federal Reserve employed a previously unused section of the Federal Reserve Act, Section 13(3), to engage in a level of lending unparalleled in global financial history. Section 13(3) provided a firehose of liquidity for the US financial system, and The Federal Reserve used it to successfully fight the Great Financial Crisis. However, once the worst of the crisis had passed, Congress quickly acted to limit the Federal Reserve’s powers under Section 13(3) by passing DoddFrank and introducing the orderly liquidation authority.
These limitations have reduced the Federal Reserve’s Section 13(3) power …