As the storm gathered during 2008, the Fed aggressively eased monetary policy by using such open market operations (supplemented by discount rate reductions) to drive short-term interest rates to near-zero levels.

FORBES: Nothing to Fear from Fed's Monetary Ease

The Fed would use the discount rate rather than the federal funds market to supply or withdraw credit in response to any imbalance between supply and demand for it.

FORBES: Recreating A Real Gold Standard

It has long been against the rules for banks to engage in arbitrage by borrowing at the discount rate and lending in the Fed Funds market at a higher rate.

FORBES: What The Discount Rate Hike Is Really About

Because that risk is not passed on to pension beneficiaries (their benefits are guaranteed, whatever the market does) it is improper to use a liability discount rate that includes the risk premium.

FORBES

Having the discount rate higher meant that, in normal times, borrowing in the Federal Funds market would be less expensive than borrowing from the Fed.

FORBES: What The Discount Rate Hike Is Really About

The Federal Reserve, lagging other central banks, pumped in extra money and then cut its discount rate to prevent a seizure of the financial system in the aftermath of the subprime mortgage market debacle.

FORBES: Unindicted Blunderer

If you assume that the bond is selling at par, has an average coupon of 5.5%, say, and you use a discount rate of 6%, then you are implicitly saying that the bond is actually riskier than the market perceives it to be.

FORBES: Irish Deal Calculations: Alternative Bond Sale Scenario