Question

The Fed offers three types of discount window loans. ______________ credit is offered to small institutions with demonstrable patterns of financing needs, _____________ credit is offered for short-term temporary funds outflows, and _____________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

Answer 1

Answer is: The Fed offers three types of discount window loans, Seasonal credit is offered to small institutions with demonstrable patterns of financing needs, Primary credit is offered for short-term termporary funds outflows, and Secondary credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

The discount window loans are a facility by Fed to help the financially distressed banks or financial institutions with short-term credit.

Types of loans offered:

• Primary credit: This type of credit facility is provided only to the otherwise financially sound institutions for meeting their short-term temporary financial obligations.
• Secondary credit: This type of credit facility is offered at a higher rate than the primary credit facility and is offered to the financial institutions that are not eligible for primary credit facility.
• Seasonal credit: This type of credit facility is offered at a floating market rate and is offered to small depositary institutions facing seasonal demands in their loan or deposit facilities.