ABSTRACT
Rationing through an open discount window, however, is rationing by price; thus monetary policy may require more rapid movements, as well as a greater range, for interest rates. Financial institutions are organizations which take a position in financial assets by emitting their own financial liabilities. The evolution and development of central banking has not been solely a reaction to an independently-evolving financial structure, but has been also a determinant of this evolution. The inadequate secondary market and the paucity of price supports for mortgages mean that savings and loan associations and mutual savings banks are always in danger of capital losses when they collectively need to sell out a part of their position. The Federal Reserve could expedite the growth of the commercial market by making dealers in such paper eligible for accommodation at the discount window. The existence of a ceiling rate on certificates of deposit means that the Federal Reserve can always induce a run on commercial banks.
