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Discount window

The discount window is not actually a place, but is where banks go to borrow money from the Federal Reserve.

Expanded Definition

Through the discount window, the regional branches of the Federal Reserve Bank lend money to banks that need funds to retain liquidity. Discount window loans are fully secured and are meant to be short term.

The discount rate is the interest rate charged to the borrowing banks, and there are three levels to the rate depending on how credit-worthy the institution is judged: primary credit, secondary credit, and seasonal credit.

Banks have to qualify to be eligible to borrow via the discount window and must provide collateral for the loans they take.

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