FOMC Statement: 50 BP Discount Window Rate Cut

For immediate release:

To promote the restoration of orderly conditions in financial markets, the
Federal Reserve Board approved temporary changes to its primary credit discount
window facility. The Board approved a 50 basis point reduction in the primary
credit rate to 5-3/4 percent, to narrow the spread between the primary credit
rate and the Federal Open Market Committee’s target federal funds rate to 50
basis points. The Board is also announcing a change to the Reserve Banks’ usual
practices to allow the provision of term financing for as long as 30 days,
renewable by the borrower. These changes will remain in place until the Federal
Reserve determines that market liquidity has improved materially. These changes
are designed to provide depositories with greater assurance about the cost and
availability of funding. The Federal Reserve will continue to accept a broad
range of collateral for discount window loans, including home mortgages and
related assets. Existing collateral margins will be maintained. In taking this
action, the Board approved the requests submitted by the Boards of Directors of
the Federal Reserve Banks of New York and San Francisco.

Release Date: August 17, 2007

Financial market conditions have deteriorated, and tighter credit conditions
and increased uncertainty have the potential to restrain economic growth going
forward. In these circumstances, although recent data suggest that the economy
has continued to expand at a moderate pace, the Federal Open Market Committee
judges that the downside risks to growth have increased appreciably. The
Committee is monitoring the situation and is prepared to act as needed to
mitigate the adverse effects on the economy arising from the disruptions in
financial markets.

Voting in favor of the policy announcement were: Ben S. Bernanke, Chairman;
Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M. Hoenig; Donald
L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; Eric
Rosengren; and Kevin M. Warsh.


*  FOMC statement

*  Federal Reserve Board
discount rate action

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