Question

What function was the Federal Reserve Bank fulfilling when it loaned $129 billion of reserve balances to banks during the initial lockdown phase of the COVID-19 pandemic in the spring of 2020?
Multiple choice question.

Economic crisis manager

Emergency sponsor

Lender of last resort

Financial glue

Answer 1

The function that the Federal Reserve Bank was fulfilling when it loaned $129 billion of reserve balances to banks during the initial lockdown phase of the COVID-19 pandemic in the spring of 2020 is best described as **Lender of last resort**. This role involves providing liquidity to banks in times of financial distress to ensure stability in the banking system.