The new discount window lending programs represent an additional backup funding option for eligible institutions seeking to supplement their funding sources. For many depository institutions, particularly those with more limited access to wholesale funding markets, the new lending programs will also eliminate the need to bid for funds in the marketplace when available funds are tight.

Certainly the high cost of primary credit, initially 100 basis points above the target federal funds rate, will ration its use. Nonetheless, the minimal administration of the new program makes it a convenient and ready source of backup funding for qualifying institutions faced with situations such as an unexpected increase in loan demand, loss of deposits, or reserve account shortfall.