Document Type

Case Study

Case Series

Broad-Based Emergency Liquidity

JEL Codes

G01, G28


In response to the Global Financial Crisis (2007–2009), financial institutions exposed to the subprime mortgage market faced a loss of confidence by investors and generalized stress in funding markets, restricting financial institutions access to lending. Stigma at the Federal Reserve (the Fed) discount window precluded these financial institutions from turning to the Fed for funding. However, the Federal Home Loan Banks (FHLBanks), a system of cooperatively owned, government-sponsored wholesale banks, served as a significant source of liquidity for their 8,000 member institutions, including commercial and community banks, insurance companies, and thrifts. Between June 2007 and September 2008, “advances”—over-collateralized loans—increased from $640 billion to $1.01 trillion. These loans acted as a wholesale funding source when the Fed’s discount window remained unattractive, and the Fed had yet to intervene by creating novel liquidity facilities.

Date Revised