A Century-Old Lending Lifeline for Troubled Banks Has a Major Flaw. The Fed Wants to Fix It.

After a major bank’s collapse, regulators discovered that the bank was not prepared to borrow from an emergency central-bank facility, which could have helped prevent its failure. This situation has led to a reconsideration of the discount window, the primary channel through which the Federal Reserve lends directly to banks. Currently, banks are hesitant to use the discount window due to concerns about appearing weak. The incident has sparked discussions about potential changes to the discount window system.