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b. During the financial crisis of 2007–2008, the Federal Reserve performed its role as "lender of...

b. During the financial crisis of 2007–2008, the Federal Reserve performed its role as "lender of last resort" by

  • borrowing from the Treasury so it wouldn't have to deplete its funds.

  • using creative facilities to lend to financial institutions during this time.

  • lending interest-free funds to troubled banks.

  • providing funds to individuals since troubled banks were unable to do so during this time

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Answer #1

Federal reserves acted as a lender of last resort during the time of economic recession of 2007-08.
Fed using the creative facilities to provide assistance to financial institutions during the time of financial crisis.The private banks used the Fed facility of discounting widow loans by around 70%.
The Fed jointly collaborated with fiscal authority to provide and execute programmes to enhance liquidity and to develop arrangements for risk sharing.
The lack of proper regulations and liquidity control policy paved the way for crisis, thus Fed stood for liquidity regulations and strengthening the use of collateral aganist loans.

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