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DISCOUNT WINDOW BORROWING DROPPING FAST

19 May 2009 by TPC 3 Comments

In more signs that the credit crisis is easing, we’re seeing a dramatic decline in bank borrowing from the Fed Discount Window. The following chart shows a nearly 70% decline in total borrowing since the peak.

Click for larger image

This is another clear positive for the economy going forward. It’s important to note, however, that this downturn is likely to have two very distinct parts. Much like Japan, the panic portion of the downturn is led by the banks and a credit crisis. The more challenging portion of the downturn will be the recovery. As we all know, the credit crisis in Japan was relatively swift. The recovery, however, was not.

*Chart is in $millions

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3 Comments »

eh said:

[This is another clear positive for the economy going forward.]

Why?

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# 19 May 2009 at 3:00 AM

TPC (author) said:

Companies are requiring less government assistance….

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# 19 May 2009 at 7:31 AM

eh said:

You could be right, but I don't think it necessarily follow that it's good for the economy. It could also just be that there is less business between banks that require access to funds that were less available via normal channels during the “liquidity crisis” (it turned out to be a bit more than that).

And I don't think the Fed is properly thought of as an agency or part of the federal government.