JPMorgan eyes plan to tap Fed's discount window to break stigma

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A senior JPMorgan Chase executive said the largest U.S. bank planned to borrow funds through the Federal Reserve's emergency lending facility in an exercise designed to break the stigma attached to that program.

Jennifer Piepszak, JPMorgan's chief financial officer, said Tuesday during the firm's investor day in New York that the bank would borrow from the so-called discount window from time to time this year and had discussed the plan with regulators.

The remarks come less than three weeks after Randal Quarles, the Fed's vice chairman for banking supervision, spoke of the need to make it easier for banks to access emergency loans from the Fed.

"The discount window is meant to be used by healthy banks when it is needed," Quarles said in a Feb. 6 speech. "While there has long been discussion about how the discount window is 'broken' because of stigma about using it, we know it is still an important part of firms' contingency planning and preparations." Quarles also discussed in his speech how improving access to the discount window could help enhance money-market liquidity.

The Fed's discount window is meant to provide emergency liquidity to banks that otherwise have healthy balance sheets. Banks have become extremely reluctant to use it, however, because of the reaction it can provoke among investors, who may fear it reveals a more serious problem, and among politicians keen to attack bank bailouts.

Bloomberg News
Federal Reserve JPMorgan Chase Jennifer Piepszak Randal Quarles