By Steven K. Beckner

NEW YORK CITY (MNI) – St. Louis Federal Reserve Bank President
James Bullard objected to proposals to restrict the Fed’s emergency
lending authority Wednesday.

Bullard, participating in a conference sponsored by the Levy
Economics Institute, is not scheduled to speak to the conference until
Thursday. But he rose to object to calls for limiting the Fed’s ability
to use its Section 13.3 authority to open its discount window to
non-depository institutions in “unusual and exigent” circumstances.

Noting that lawmakers are “talking about stripping … the Fed’s
ability to carry out its lender of last resort role,” Bullard said that
would be “going in the wrong direction.”

Bullard said that during the financial crisis emergency Fed lending
“was essential,” noting that “at one point through all programs we had
$1.6 trillion in loans out.”

He said it was “all collateralized lending” and added “it’s a
little false to say we were accepting ‘junk.'” Bullard went on to
observe that the loans “were all repaid.”

“All those programs are more or less shut down,” he said, “so that
part of the response to the crisis went pretty well.” And yet he added,
“opening up the discount window to all financial institutions is exactly
the opposite” of what some reformers want.

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