Whatever rule-making challenges the Fed faces, its core mission as a lender of last resort appears intact, meaning its ability to provide emergency liquidity and other forms of banking sector support with Treasury’s approval should remain.
The law giving the Fed its emergency lending powers “is pretty explicit” and “in that sense it seems much more clear” than banking regulation, said Steven Kelly, associate director of research at the Yale School of Management’s Program on Financial Stability, adding it’s also less likely that banks would sue to stop such efforts.
That said, “each of the Fed’s emergency lending actions is distinctive” and there are ways a program could be set up, for example to benefit a specific industry like green energy, that could create grounds for a legal challenge, said Christina Parajon Skinner, a business and legal professor at the Wharton School of the University of Pennsylvania.
