I'm rather confused how this was legally possible:
Banks borrowed $152.85 billion at the Fed on Wednesday, up from $4.58 billion a week before, according to new data released Thursday. The daily average for borrowing last week was $85 billion, compared with $4.4 billion a week earlier, and the most since the 2008 financial crisis.
Meanwhile, the Federal Home Loan Bank system had its biggest day of issuance ever on Monday, issuing $112 billion worth of debt to fund requests from banks looking to solidify their balance sheets.
Banks tapped the Fed’s new funding program for $11.94 billion on Wednesday. The two banks that failed last week borrowed another $142.8 billion. [...]
Banks are generally skittish about using the discount window and especially afraid of it becoming public. The program is known as the industry’s lender of last resort, offering overnight loans that banks can use to ease a liquidity issue. The Fed would reject an insolvent bank from borrowing, but the program has long carried a stigma that to need the discount window is a sign of dire trouble.
Borrowing is secret and names are withheld for two years, but borrowing has been largely nonexistent since the financial crisis. It spiked briefly in the pandemic, when a group of the biggest banks said they would borrow publicly in an attempt to ease the stigma.
So "would reject" there is just a description of common practice (but thus allows for exceptions) or is the Fed legally not allowed to lend to insolvent banks? (And/or are bridge banks not necessarily considered insolvent by the Fed, even if they are created as a result of "failed" banks?)