WASHINGTON — In a move to restore order to the financial markets, the Federal Reserve Board approved a temporary 50-basis point decrease in discount window borrowing.

On Friday, Aug. 17, the Fed dropped the primary credit rate for its discount window to 5.75% as well as allowing the Reserve Banks to offer financing 30 days out that is renewable by the borrower. "These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets," a statement read.

This change followed an Aug. 10 increase of liquidity pumped into the markets after the Federal Open Market Committee maintained its target rate at 5.25% during its Aug. 7 meeting. The FOMC also released a statement Aug. 17 stating, "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably."