Press Release

New York Fed Releases Report on the Political Origins of Section 13(3) of the Federal Reserve Act

March 30, 2018

NEW YORK—The Federal Reserve Bank of New York today released The Political Origins of Section 13(3) of the Federal Reserve Act, the first article in a forthcoming issue of the Economic Policy Review, the Bank’s policy-oriented journal focused on macroeconomic, banking and financial market topics.

During the financial crisis, the Federal Reserve made emergency loans to nonbank financial institutions under authority granted to it in the third paragraph of Section 13 of the Federal Reserve Act. Added at the height of the Great Depression in 1932, Section 13(3) expanded the Federal Reserve’s lending authority to include, in an emergency, individuals, partnerships and corporations. This article explores the political and legislative history of the original version of the section, focusing on why Congress chose to endow the central bank with such an authority.

The author concludes that, in 1932, the section’s original framers meant to endow the Fed with the ability to lend directly to the real economy in an emergency. Her analysis provides insights into the evolving role of the Federal Reserve as an emergency provider of liquidity.

The article is written by Parinitha Sastry, a former senior research analyst at the New York Fed.

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