Liquidity Risk,Bank Networks,and the Value of Joining the Federal Reserve System |
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Authors: | HAELIM ANDERSON CHARLES W CALOMIRIS MATTHEW JAREMSKI GARY RICHARDSON |
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Abstract: | Reducing systemic liquidity risk related to seasonal loan demand was one reason for founding the Federal Reserve System. Nevertheless, less than 8% of state‐chartered banks joined the Fed in its first decade. Banks facing high liquidity risk from seasonal loan demand were more likely to join the Fed in its first decade. We also find evidence consistent with the notion that banks could obtain some indirect access to the discount window through interbank transfers. Some banks apparently joined the Fed to pass through discount window liquidity to other banks via the interbank network. Joining the Fed increased member banks’ lending. |
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Keywords: | G21 G28 N22 Federal Reserve member banks bank networks liquidity risk |
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