Fed Amends Rule To Limit Bank Emergency Lending

Emergency Lending

The Federal Reserve adopted a new rule Monday requiring that every new Fed lending program be designed broadly enough that at least five potential recipients could be eligible to participate.

The Fed’s latest rule would curtail the central bank from providing emergency lending to a single failing firm, like AIG, and also would bar the Fed from making loans to insolvent firms.

Fed can’t extend emergency lending unless five firms participate

The Federal Reserve has long had authority to extend emergency lending to help mitigate extraordinary pressures in financial markets, though it has exercised the authority only sparingly and only in severe financial crises. In the 2010 Dodd-Frank Act, Congress...