New Fed rule limits emergency lending power

Washington

IN the lead-up to the financial crisis of 2008, the US Federal Reserve had the ability to make huge emergency loans to almost any entity it chose, a power it used to help save Wall Street firms from possible collapse.

Now, seven years later, the Fed, under the direction of Congress, has adopted a new rule that would place restrictions on its extraordinary financial powers. The restrictions, which stem from the Dodd-Frank Act of 2010, aim to make sure that the Fed's emergency loans are not used to shore up insolvent firms.