Congress originally approved the 13(3) authority in response to business lending problems during the Depression. It allows the Fed broad authority to lend to a wide range of borrowers using good collateral in unusual and exigent circumstances as long as at least five governors – all we currently have on the Board – approve.
The circumstances were certainly unusual and exigent, and for the most part, the authority was used to target critical markets that performed the same function as bank lending but were outside the banking system. Initially, 13(3) was used to establish lending facilities for securities dealers around the time of the near failure of Bear Stearns.