The First Line of Defense: The Discount Window During the Early Stages of the Financial Crisis

Elizabeth Klee

Figure 1: Primary credit and the federal funds rate, monthly averages

year, month	mprimryt	ffhighdev	pcdev
2006, 8	0.0244895	39.05264	100
2006, 9	0.100295	34.35001	100
2006, 10	0.030419	28.00001	100
2006, 11	0.051619	33.57143	100
2006, 12	0.13224	48.3	100
2007, 1	0.2512857	63.85715	100
2007, 2	0.0109737	37.26316	100
2007, 3	0.0152318	22.77274	100
2007, 4	0.0510476	37.76191	100
2007, 5	0.0179364	31.00001	100
2007, 6	0.0543762	36.52382	100
2007, 7	0.0640286	46.33334	100
2007, 8	0.5578218	44.08696	76.08696
2007, 9	1.566516	65.47369	50
2007, 10	0.1599773	92.13637	50
2007, 11	0.358625	59.75	50
2007, 12	4.00303	69.75	50
2008, 1	1.077786	60.66667	50
2008, 2	0.238435	88.55	50
2008, 3	1.142848	84.2381	36.90476
2008, 4	9.992409	131.7727	25
2008, 5	14.34803	97.04762	25
2008, 6	14.27004	83.80952	25
2008, 7	15.24869	46.86364	25
2008, 8	17.95291	57.71429	25
2008, 9	19.54839	43.125	25

Return to Figure 1

Figure 2: Primary credit, total balances, and high fed funds rate

year, month	mprimryt	ffhighdev	totbal
2006, 8	0.0244895	39.05264	16.71991
2006, 9	0.100295	34.35001	16.43727
2006, 10	0.030419	28.00001	15.57974
2006, 11	0.051619	33.57143	15.96683
2006, 12	0.13224	48.3	15.09713
2007, 1	0.2512857	63.85715	16.31757
2007, 2	0.0109737	37.26316	15.55522
2007, 3	0.0152318	22.77274	15.39536
2007, 4	0.0510476	37.76191	15.2411
2007, 5	0.0179364	31.00001	16.65994
2007, 6	0.0543762	36.52382	15.50128
2007, 7	0.0640286	46.33334	15.21979
2007, 8	0.5578218	44.08696	16.32434
2007, 9	1.566516	65.47369	17.2294
2007, 10	0.1599773	92.13637	15.38164
2007, 11	0.358625	59.75	16.41962
2007, 12	4.00303	69.75	13.98059
2008, 1	1.077786	60.66667	17.98877
2008, 2	0.238435	88.55	14.94694
2008, 3	1.142848	84.2381	17.21632
2008, 4	9.992409	131.7727	16.23033
2008, 5	14.34803	97.04762	17.85586
2008, 6	14.27004	83.80952	15.85603
2008, 7	15.24869	46.86364	18.36715
2008, 8	17.95291	57.71429	16.24521
2008, 9	19.54839	43.125	16.6796

Return to Figure 2

Figure 3: Primary credit and federal funds volume

year, month	mprimryt	loan_sum
2006, 8	0.0244895	321.5116
2006, 9	0.100295	299.9395
2006, 10	0.030419	289.78871
2006, 11	0.051619	291.67648
2006, 12	0.13224	302.71791
2007, 1	0.2512857	313.71152
2007, 2	0.0109737	319.48338
2007, 3	0.0152318	329.42813
2007, 4	0.0510476	340.887
2007, 5	0.0179364	346.18962
2007, 6	0.0543762	326.9042
2007, 7	0.0640286	346.86855
2007, 8	0.5578218	366.88244
2007, 9	1.566516	345.90248
2007, 10	0.1599773	345.57179
2007, 11	0.358625	323.08497
2007, 12	4.00303	352.84591
2008, 1	1.077786	336.97206
2008, 2	0.238435	360.5746
2008, 3	1.142848	385.65515
2008, 4	9.992409	379.28638
2008, 5	14.34803	366.58674
2008, 6	14.27004	339.15231
2008, 7	15.24869	352.27304
2008, 8	17.95291	369.1807
2008, 9	19.54839	370.70212

Return to Figure 3

Figure 4: Primary credit and fed funds market participation

year, month	mprimryt	numreceivers	numsenders
2006, 8	0.0244895	150.526	314
2006, 9	0.100295	150.9	334.8
2006, 10	0.030419	147.619	339.714
2006, 11	0.051619	142.333	342.429
2006, 12	0.13224	145.75	363.7
2007, 1	0.2512857	163.571	326.619
2007, 2	0.0109737	151.053	341.632
2007, 3	0.0152318	136.318	347.591
2007, 4	0.0510476	139.048	354
2007, 5	0.0179364	148.773	321.591
2007, 6	0.0543762	151.381	338.095
2007, 7	0.0640286	148.905	335.857
2007, 8	0.5578218	146.435	348.87
2007, 9	1.566516	159.737	330
2007, 10	0.1599773	156.545	322.864
2007, 11	0.358625	155.5	327.45
2007, 12	4.00303	161.95	320.1
2008, 1	1.077786	168.429	307.667
2008, 2	0.238435	157.4	321.7
2008, 3	1.142848	154.571	330.238
2008, 4	9.992409	160.227	318.045
2008, 5	14.34803	167.429	281.571
2008, 6	14.27004	172.667	284.143
2008, 7	15.24869	167.864	270.955
2008, 8	17.95291	160.476	285.857
2008, 9	19.54839	158.5	299.625

Return to Figure 4

Figure 5: Distribution of brokered federal funds rates

regime, bin	volumeshare
100bp	1.633066955
100bp, -5	0.003706457
100bp, -4.75	0.003411372
100bp, -4.5	0.000436338
100bp, -4.25	0.013204192
100bp, -4	2.48E-05
100bp, -3.75	0.002611088
100bp, -3.5	0.000312379
100bp, -3.25	0.013779125
100bp, -3	0.00043138
100bp, -2.75	0.001018453
100bp, -2.5	0.002243176
100bp, -2.25	0.012435082
100bp, -2	0.003024618
100bp, -1.75	0.009819177
100bp, -1.5	0.007525844
100bp, -1.25	0.07649487
100bp, -1	0.034750256
100bp, -0.75	0.108149673
100bp, -0.5	0.249251333
100bp, -0.25	0.780551185
100bp0	94.6391575
100bp, 0.25	1.9254665
100bp, 0.5	0.236213503
100bp, 0.75	0.140541275
100bp, 1	0.046331541
100bp, 1.25	0.015968197
100bp, 1.5	0.017236935
100bp, 1.75	0.013749761
100bp, 2	0.004815886
100bp, 2.25	0.000815159
100bp, 2.5	0.000902427
100bp, 2.75	0.002033932
100bp, 3.5	0.00024792
100bp, 3.75	0.00027172
50bp, -5	0.001488286
50bp, -4.75	0.001913638
50bp, -4.25	0.002027641
50bp, -4	0.010218571
50bp, -3.75	0.025097262
50bp, -3.5	0.018971912
50bp, -3.25	0.078854284
50bp, -3	0.021169378
50bp, -2.75	0.145410886
50bp, -2.5	0.06577524
50bp, -2.25	0.179822746
50bp, -2	0.098060774
50bp, -1.75	0.305216752
50bp, -1.5	0.208078656
50bp, -1.25	0.719260455
50bp, -1	0.611989198
50bp, -0.75	1.086781431
50bp, -0.5	1.927392326
50bp, -0.25	7.723527463
50bp0	77.80445562
50bp, 0.25	7.07432632
50bp, 0.5	1.463859375
50bp, 0.75	0.22035577
50bp, 1	0.091180131
50bp, 1.25	0.020365704
50bp, 1.5	0.024102492
50bp, 1.75	0.004822046
50bp, 2	0.01285879
50bp, 2.25	0.006161503
50bp, 2.5	0.028238736
50bp, 2.75	0.005512611
50bp, 3	0.002381257
50bp, 3.75	0.002494367
50bp, 4.75	0.000595314
50bp, 5.75	0.002619383
50bp, 6.75	0.001190629
50bp, 10.25	0.003423058
25bp, -2.75	0.011881542
25bp, -2.5	0.032013358
25bp, -2.25	0.004294533
25bp, -2	0.13895244
25bp, -1.75	0.1088037
25bp, -1.5	0.151920485
25bp, -1.25	0.488522334
25bp, -1	0.849485535
25bp, -0.75	1.106116082
25bp, -0.5	2.24079301
25bp, -0.25	4.659937583
25bp0	77.65089803
25bp, 0.25	9.301688117
25bp, 0.5	2.079494813
25bp, 0.75	0.718411327
25bp, 1	0.294829935
25bp, 1.25	0.069712542
25bp, 1.5	0.016398429
25bp, 1.75	0.014451445
25bp, 2	0.002740321
25bp, 2.5	0.000468309
25bp, 3	0.004253633
25bp, 3.75	0.005276141
25bp, 4.75	0.009352539
25bp, 5	0.007018494
25bp, 5.75	0.002726688
25bp, 6	0.001124759
25bp, 7	0.001826881
25bp, 7.75	0.026607005

Return to Figure 5

Figure 6: Lowering the primary credit rate

The figure shows isocurves for two different levels of discount window stigma. The primary credit rate is plotted on the x axis and the effective federal funds rate on the y axis. There are three isocurves for each stigma level. As explained in the text, the figure illustrates that as the primary credit rate falls, low stigma types drop out of the federal funds market and high stigma ones remain, pushing up the effective rate.

Return to Figure 6

Figure 7: Trading above the target rate

The figure has three panels. The top shows the share of federal funds volume brokered 100 bp above the target rate; the second, 50-100 bp; and the third, 25-50. The chart shows that the frequency of high rate trading increased over the sample period, as well as the amount brokered.

Return to Figure 7

Figure 8: Selected financial market indicators

The figure has four panels. In each figure the x axis is time, which goes from July 2006 to September 2008. The top left panel plots the spread of the repo rate to the target rate, which widened considerably and was volatile in the second half of the sample. The top right panel displays the Libor-OIS spread, which was also wide and volatile in the second part of the sample. The bottom left panel shows the S&P 500 VIX, which climbs over the sample, and again, was volatile. The bottom right panel shows a financial CDS index, which rises to a peak in March 2008, and then falls before rising again in the fall of 2008.

Return to Figure 8

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