WASHINGTON — The Federal Reserve on Friday unveiled a major shift in the way it lends money to the nation's banks, proposing to charge them more for the privilege but making it less onerous to get loans.

        Private economists predicted the change would have no impact on consumer or business borrowing rates but should help smooth out volatility in the $60 billion daily market for short-term lending between banks.

        Banks that go to the Fed's discount window now can get loans about a half percentage point below the Fed's target for the federal funds rate, the interest that commercial banks charge each other.

        Under the proposal, the Fed would take away that break and instead charge banks 1 full percentage point higher than the funds rate.

        The funds rate target now is 1.75 percent, the lowest in 40 years, and the discount rate is 1.25 percent.

        The banking industry was caught by surprise by the Fed proposal, but some officials said it might increase flexibility in Fed operations, especially during times of high demand for bank reserves such as what occurred after Sept. 11.

        They noted that the volume of Fed lending from the discount window is small, but for banks facing difficulty raising reserves, the Fed's loan window can be crucial.

        Some bank economists wondered about the timing of the Fed proposal.

        “This is awkward timing, given that the economic recovery is just getting under way,” said Carl Tannenbaum, chief economist at LaSalle Bank/ABN Amro in Chicago. “We have enough credit stresses out there already.”

        The Fed said it was proposing the change to cut down on administrative costs of screening banks that seek loans directly from the Fed.

        The discount window has served as the Fed's primary way of serving as a lender of last resort, helping financial institutions obtain reserves to keep operating when they were short on resources.

        On a typical day, the Fed has about $100 million in loans outstanding from the discount window. But that can spike dramatically during a crisis.

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