Citadel; the Federal Reserve as Lender of Last Resort From the Great Financial Crisis to the Global Pandemic

Amine Assouad*


This article considers the role of the Federal Reserve as lender of last resort. It draws a comparative synopsis and analysis of the actions taken by the Federal Reserve during the financial crisis of 2008-09 and the macroeconomic crisis caused by the Covid-19 pandemic. It criticizes the Dodd-Frank Act’s legal regime as applied to the Federal Reserve’s emergency lending powers, which came to be tested for the first time during the Covid-19 pandemic, and suggests interpretative and reformative approaches to improve such legal regime. It also analyzes the effect of the more recent Coronavirus Aid, Relief, and Economic Security Act of 2020 and the Consolidated Appropriations Act of 2021 on the Federal Reserve’s emergency lending powers. Contrary to the latest legislative trend towards more curtailment of the Federal Reserve’s emergency lending authority, it argues that such authority should be expanded. It also addresses the very debated issue of the moral hazard implications of the Federal Reserve’s lending of last resort and calls for future legislative reform that explicitly grants the Federal Reserve a financial stability mandate to safeguard the financial system and the broader economy against systemic risks.

* Attorney at Law, admitted to practice in New York, Paris and Beirut. Holds an LL.M from Harvard Law School (2010), an MPA from the Ecole Nationale d’Administration (2008), a Master in International Affairs from Institut d’Etudes Politiques de Paris (2006), and an LL.B from Saint Joseph University’s Faculty of Law (2004).