Where Collateral Sleeps
Banks can use the discount window to fend off a run by prepositioning assets with the Fed and borrowing against them. Following the March 2023 bank runs, policymakers have considered mandatory prepositioning, arguably the largest update to the lenderof-last-resort toolkit in over a century. We study the forces that shape the largest banks’ prepositioning. We show that run-prone uninsured-deposit flows causally drive prepositioning and that banks face a prepositioning stigma, even absent borrowing. Prepositioning is no panacea—banks still need good assets to borrow against—but it can help at the margin.
Related
Programs
Conferences
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
