Federal Reserve Vice Chair Jefferson makes the case for discount window modernization at Treasury Market Conference

The Federal Reserve’s discount window has been around since 1913. For most of that time, banks have treated it like a fire extinguisher behind glass: essential in theory, embarrassing to actually use. Vice Chair Philip N. Jefferson wants to change that.

Speaking at the 12th annual US Treasury Market Conference at the Federal Reserve Bank of New York on September 22, Jefferson outlined ongoing efforts to modernize the discount window and explained why those efforts matter for the broader Treasury market. His session, titled “Discount Window Modernization and Treasury Market Functioning,” tackled one of the financial system’s most persistent contradictions: the Fed built a tool specifically for banks to borrow from in times of stress, and then watched as stigma made banks reluctant to touch it.

What the Fed has been building

One of the most tangible upgrades has been the launch of “Discount Window Direct,” an online portal that lets banks request loans around the clock. The Fed also updated its collateral-margin tables, with new schedules taking effect in July 2025. Separately, improvements to the Borrower-in-Custody program were implemented in September 2026, giving banks more flexibility in how they pledge collateral when borrowing from the window.

In 2024, the Fed launched a Request for Information focused on operational efficiencies. Part of that effort involves exploring collateral interoperability with Federal Home Loan Banks, a move that could make it significantly easier for institutions to move pledged assets between different lending facilities.

The current primary credit rate sits at the top of the federal-funds target range. That pricing structure, introduced as part of the Fed’s 2003 overhaul that replaced the old “adjustment credit” facility, was designed to make borrowing less punitive.

Congress enters the chat

The Discount Window Preparedness Act, introduced in May 2026, would require banks with more than $10 billion in assets to conduct quarterly or semi-annual tests of their ability to borrow from the discount window. The bill would also create regulatory incentives for banks that successfully complete these tests.

Why this matters for Treasury markets

Jefferson’s decision to frame discount window modernization within the context of Treasury market functioning was deliberate. When banks can’t easily access short-term funding, they pull back from market-making activities, including in Treasury securities.

Discount-window borrowing has already increased from pre-pandemic levels, a sign that some of the stigma reduction efforts are working. But Jefferson’s remarks suggest the Fed believes there’s still a meaningful gap between where things stand and where they need to be.