Fed's Kohn says don't widen the discount window

WASHINGTON (Reuters) - Federal Reserve Vice Chairman Donald Kohn said on Tuesday that injecting more liquidity into the U.S. financial system via the central bank's discount window was not a good idea and would not calm markets.

"I would be very cautious about opening that window up more generally. The banks have access to the discount window ... There is a moral hazard issue here, having them have access, and the control on that is this panel," he told the Senate Banking Committee, referring to bank regulators.

"I don't think that liquidity is the problem for the investment banks, or liquidity is the issue behind restarting these markets," he said.

"I think it is about confidence, it is about the underlying economy, it is about the housing market," Kohn added.

(Reporting by Alister Bull; Editing by James Dalgleish)