I wish the fed allowed me to borrow at their rates. In fact, if I had access to such rates I could turn that money around and could loan it back to the fed for a substantial profit. I wonder if anyone else has though of that?
Moreover, discount window loans are not unsecured - the bank must put up collateral for them, isn't automatic, limitless or guaranteed, terms are very short, and in practice only ever used in times of crisis.
Besides that most people could probably get a refinancing loan from a normal bank for 5% or less already.
That's the justification for interest in the first place 20-30% covers risk to absurdity.
No, it pretty much covers uncollateralised default risk and pre-payment risk.
If it were otherwise, for example, if were a cartel keeping the prices up artificially, then you would expect the same thing from the collateralised market, no? YMMV but my credit card rate is ~25% and my house secured rate is ~3%. The only difference is the house; lender and borrower are the same.
The other argument against undercutting the market and making billions is a variant of the Fermi paradox: why isn't everyone doing it? Maybe not you or me but an institution that can borrow a lot at bugger all, or is cash rich, would hoover up. Or at least drive the rate down substantially.
If there were only one or 2 players then, fine, you could have a big illiquidity premium but there aren't. There are loads of players. In the UK, cash rich companies like the supermarket chains have got involved and have had some impact but it's small, primarily squeezing operational costs and profit margin. But the cards are still running at rates substantially over base.
Just pull up to the Discount Lending Window and ask for some cash.