Bringing the Discount Window into the 21st Century Act
- Sponsor
- Sen. Cortez Masto, Catherine [D-NV]
- Committees
- Banking, Housing, and Urban Affairs Committee (primary)
- Last action
- Sep 23, 2026
Bottom line
This bill aims to modernize the Federal Reserve's discount window, a critical tool for providing liquidity to financial institutions, by mandating a review, remediation plan, and ongoing congressional oversight to enhance its effectiveness, particularly during financial stress.
What it actually does
This bill mandates the Federal Reserve Board to conduct a comprehensive review of its discount window operations, identify deficiencies, and develop a remediation plan within specific timelines. It requires the Board to report its findings and plan to Congress, and then provide annual updates on implementation, with an independent oversight report from the Inspector General. The provisions of the mandate are set to sunset once the remediation plan is fully implemented and certified.
Proponents argue
Supporters argue that the discount window is a crucial backstop for financial stability, but its current operations may be outdated, especially given rapid changes in banking technology and depositor behavior. A mandated review and modernization effort will ensure it remains an effective tool to prevent liquidity crises and broader financial instability, reducing stigma and improving access for institutions.
Opponents contend
Critics might argue that mandating such a detailed review and remediation plan could be seen as an unnecessary intrusion into the operational independence of the Federal Reserve, or that the Fed already possesses the authority and expertise to conduct such reviews internally without congressional directive. Some might also express concern about the potential for increased administrative burden on the Federal Reserve.
The bill is concise and clearly structured, making it accessible for a quick read and understanding of its core purpose.
Section 2(a), adding paragraph (12) to Section 10 of the Federal Reserve Act
Mandated Review of Discount Window Operations
This provision requires the Federal Reserve Board to commence a comprehensive review of its discount window lending programs within 60 days of the bill's enactment and complete it within 240 days. The review must assess the effectiveness of the discount window in providing liquidity, its technology infrastructure, cybersecurity, inter-agency communications, Board oversight, interaction with other liquidity providers, operating hours, impact of mobile banking on liquidity risk, and ways to reduce the stigma associated with its use.
Supporters argue
Supporters argue this review is essential to ensure the discount window remains a robust and effective tool for financial stability in a rapidly evolving financial landscape, particularly in light of recent liquidity events. It addresses concerns about outdated technology and stigma that may deter institutions from using it when needed.
Critics contend
Some might argue that the Federal Reserve already has the internal capacity and ongoing responsibility to review and update its operations, and a congressional mandate could be seen as micromanagement, potentially diverting resources from other critical functions.
Tradeoffs
The tension lies between congressional oversight and the operational independence of the Federal Reserve. While the review aims to improve financial stability, it also imposes specific timelines and reporting requirements on an independent agency.
Section 2(a), adding paragraph (12)(C), (D), (E) to Section 10 of the Federal Reserve Act
Development of Remediation Plan and Ongoing Congressional Oversight
Following the review, the Board, in consultation with Federal Reserve banks, must identify deficiencies and areas for enhancement, then develop a written plan to address them. This plan must include specific actions, timelines, milestones, and measures for ongoing maintenance. The Board must submit a report containing the review findings and the remediation plan to Congress within 365 days, after consulting with other financial regulators. The Chairman of the Board must testify on this report. Additionally, the Board must submit annual progress reports, and the Inspector General of the Board and CFPB must submit annual reports on the Board's implementation progress.
Section 2(a), adding paragraph (12)(F) and Section 2(b)
Confidentiality Protections and Sunset of Mandate
This provision allows any report required under the Act to include a confidential annex for information that, if made public, could impact monetary policy, financial stability, cybersecurity, or significantly endanger a financial institution's stability. Furthermore, the entire paragraph (12) added by the bill will sunset (be repealed) once the Board notifies Congress and publishes on its website that the remediation plan has been fully implemented.
The entire new paragraph (12) added to the Federal Reserve Act, which mandates the review and reporting requirements for the discount window, will be repealed (sunset) once the Federal Reserve Board notifies Congress and publishes on its website that the remediation plan has been fully implemented.
Section 2(b)
Why it matters:This is standard legislative practice for sunset provisions, often placed at the end of the amending section. It is not necessarily evasive, but it does require careful reading to note the temporary nature of the new requirements.
Case for: Supporters argue that this ensures the mandate is not perpetual, allowing the Federal Reserve to regain full operational autonomy once the identified improvements are made, thus respecting the institution's independence.
Case against: Critics might argue that removing the oversight mechanism entirely could lead to backsliding on improvements or a lack of sustained attention to discount window effectiveness in the long term, once the immediate congressional pressure is lifted.
Estimated impact: Ensures the mandated review and reporting are temporary, likely lasting a few years until the remediation plan is certified as complete, thereby limiting the long-term administrative burden on the Federal Reserve.