6 The Federal Reserve Seasonal Borrowing Privilege

Abstract

appropriately use the discount window to replace some of their larger seasonal outflows of funds, provided they lacked reasonably reliable access to national money markets that could otherwise be employed for this purpose. An extensive reappraisal of the discount mechanism conducted earlier by a committee of Board members and Reserve Bank presidents had indicated that banks with deposits under $100 million usually lacked such access, and that many somewhat larger banks, with deposits up to about$500 million, also lacked reliable access during periods of monetary restraint. This imperfection in financial markets obviously placed the na-tion's smaller banks at a disadvantage in raising nonlocal funds to meet development credit demands as well as the shorter seasonal outflows; however, the committee concluded that long-term credit should not be to banks supplied through the discount window. But it did recommend that a seasonal borrowing privilege be established t