JPMorgan Won't Shun the Fed's Discount Window Anymore
February 25 2020 - 2:53PM
Dow Jones News
By David Benoit
JPMorgan Chase & Co. Chief Executive James Dimon said the
bank is open to tapping the Federal Reserve's rainy-day fund, a
move that's likely to lessen the stigma associated with borrowing
directly from the central bank.
The nation's biggest bank will occasionally tap the Fed's
discount window when it makes business sense to do so, Mr. Dimon
said at JPMorgan's investor day Tuesday. Banks -- scarred from the
public beating they took during the financial crisis -- have all
but abandoned the window in recent years to avoid even a whiff of a
government bailout.
"We think it's time," Mr. Dimon said. "We think it's a good idea
and will help remove the stigma." He said the bank and its
regulators have discussed how and when it might appropriately
borrow from the window, and hopes other big banks follow suit.
The discount window is meant to help banks weather short-term
funding crunches. To discourage banks from relying too heavily on
it, the Fed charges them a higher interest rate than would
typically be paid for short-term funding.
What's more, the names of borrowers must be disclosed on a
two-year lag. Bankers have said they are determined to avoid that
disclosure. Borrowing has plummeted as a result.
The desire to avoid the window is one reason banks are hoarding
cash at levels well above what regulators require. The hoarding has
drained liquidity from other parts of the market, contributing to a
cash shortfall that roiled overnight-lending markets in September.
The resulting spike in short-term rates forced the Fed to inject
tens of billions of dollars into the market for repurchase
agreements to stabilize it.
Mr. Dimon has said JPMorgan' keeps about $120 billion in
reserves at the Fed and won't let that fall below $60 billion on
any given day. Doing so gives the bank a big buffer over its
regulatory requirements, but it also deprives the market of $60
billion in daily liquidity.
A willingness to access the discount window could allow JPMorgan
to free up some of that cash while maintaining required reserve
levels. Lessening the stigma of doing so, meanwhile, would give the
bank cover should it ever need to access the window in a cash
crunch.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
February 25, 2020 15:38 ET (20:38 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Apr 2024 to May 2024
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From May 2023 to May 2024