Federal Reserve Proposals for Reform of the Discount Mechanism

Abstract

In July 1968, the Federal Reserve made public the results of a major three-year study entitled, Reappraisal of the Federal Reserve Discount Mechanism. The final Report of a System Committee [27] reaffirms certain long-established principles of Federal Reserve lending, while at the same time proposing significant changes aimed at increased use of the discount window for the purpose of facilitating short-run adjustments in bank reserve positions. 1 The proposed revisions are thus more evolutionary than revolutionary. Nevertheless, the revised discount mechanism has significant implications for the future of monetary controls.2