Summary of Proposed Rule
• Section 201.3 - There is no obligation for the Federal Reserve Bank to extend credit to any person or entity.
• Section 201.4(d) Emergency credit for others. –
(1) Authorization to extend credit.
(i) In unusual and exigent circumstances, the Fed, generally by the affirmative vote of not less than five members, may authorize any Federal Reserve Bank,
subject to conditions and periods, to extend credit to any participant in a program or facility with broad-based eligibility.
(ii) The Fed may not establish any program or facility without obtaining the prior approval of the Treasury Secretary.
(iii) At the time of authorization to extend credit, or soon thereafter, the Fed will document the justification for its authorization, and will make
appropriate public disclosures.
(2) Broad-based eligibility; insolvency.
(i) A program or facility established must have broad-based eligibility, which is designed to provide liquidity to an identifiable market or sector of the
financial system; is not to aid a failing financial company and not structured to remove assets from the balance sheet of a company; and is not established
to assist a single and specific company to avoid bankruptcy, resolution under Title II of the Dodd-Frank Act, or any other insolvency proceeding.
(ii) A Federal Reserve Bank may extend credit through a program or facility with broad-based eligibility through such mechanism or vehicle as the Fed
determines would facilitate the extension of such credit.
(iii) A Federal Reserve Bank may not extend credit through a program or facility to any person or entity that is “insolvent.”
(3) Indorsement or other security.
(i) All credit extended under a program or facility must be indorsed or otherwise secured to satisfaction of lending Federal Reserve Bank.
(ii) In determining whether an extension of credit under any program or facility is secured to its satisfaction, a Federal Reserve Bank must, prior to or
at the time credit is initially extended, assign a lendable value to all collateral, consistent with sound risk management and to protect the taxpayer.
(4) The Fed will periodically review the existence of unusual and exigent circumstances; extent of usage of program or facility; extent to which continuing
authorization facilitates confidence in financial markets; economic and market conditions; financial market; ongoing need for liquidity support; and other
(5) Each lending Federal Reserve Bank must obtain evidence participants in a program or facility are unable to secure adequate credit from other
(6) The Fed will comply with required reporting requirements.
(7) There is no obligation for Federal Reserve Banks to extend credit.
(8) In unusual and exigent circumstances and after consultation with the Fed, a Federal Reserve Bank may extend short-term emergency credit, if the
collateral used to secure such credit consists solely of obligations of, or obligations fully guaranteed as to principal and interest by, the U.S. or an
Questions to Consider Regarding the Proposal