Access to the Discount Window of the Federal Reserve Is

question 60

Multiple Choice

Access to the discount window of the Federal Reserve is unlikely to deter bank runs because

• A)discount loans are meant to provide temporary liquidity for inherently solvent banks.
• B)borrowing is not automatic, that is, banks gain access only on a "need to borrow" basis.
• C)a bank needs high-quality liquid assets to pledge as collateral.
• D)discount window advances to undercapitalized banks that eventually fail requires the Federal Reserve to compensate the FDIC for incremental losses caused by keeping the bank open for an additional period of time.
• E)All of the above.

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