Responding to the financial crisis of 2007-09, the Federal Reserve made loans to nonbank firms and purchased (and continues to purchase) mortgage-backed securities. These actions are examples of credit policy, which is distinct from monetary policy. But this is not the first time the central bank has engaged in credit policy. During the Great Depression, Reserve Banks exercised broad authority to lend to nonbank businesses.
Our Research Focus: Monetary History
Board of Governors of the Federal Reserve System, Press release issued on June 28, 1934, and reprinted in the Federal Reserve Bulletin, July 1934, vol. 20, no. 7, p. 429.
Board of Governors of the Federal Reserve System, "Statement of Chairman Eccles before the Senate Committee on Banking and Currency with Reference to S. 2343," June 5, 1939.
"Federal Reserve Assistance in Financing Small Business," Hearing before the Senate Committee on Banking and Currency on S. 408, April 17, 1947.
Federal Reserve Bank of Richmond Economic Quarterly, Winter 2001, vol. 87, no. 1, Special issue commemorating the 50th anniversary of the Treasury-Federal Reserve Accord.
Hetzel, Robert L., "The Case for a Monetary Rule in a Constitutional Democracy," Federal Reserve Bank of Richmond Economic Quarterly, Spring 1997, vol. 83, no. 2, pp. 45–65.
Lacker, Jeffrey M., "The Dangers of the Fed Conducting Credit Policy," Federal Reserve Bank of Richmond Region Focus, Fourth Quarter 2012, vol. 16, no. 4, p. 1.
Lacker, Jeffrey M., "Perspectives on Monetary and Credit Policy," Speech at the Shadow Open Market Committee Symposium, New York, Nov. 20, 2012.
Price, David A., "When the Fed Conducts Credit Policy," Federal Reserve Bank of Richmond Region Focus, First Quarter 2012, vol. 16, no. 1, pp. 6–8.
"The Role of the Federal Reserve in Preserving Financial and Monetary Stability," Joint Statement by the Department of the Treasury and the Federal Reserve, March 23, 2009.
Schwartz, Anna J., "The Misuse of the Fed's Discount Window," Federal Reserve Bank of St. Louis Review, September/October 1992, vol. 74, no. 5, pp. 58-69.
Szymczak, M.S., "Recent Relations of the Federal Reserve System with Business and Industry," Speech before the Illinois Bankers Association, Decatur, Ill., May 20, 1935.
Todd, Walker F., "History of and Rationales for the Reconstruction Finance Corporation," Federal Reserve Bank of Cleveland Economic Review, Fourth Quarter 1992, vol. 28, no. 4, pp. 22–35.