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Policy Note | Discount Window Stigma: What's Design Got to Do with It?

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Abstract

This article utilizes discount window transaction data, which the Federal Reserve began disclosing in 2010, to assess how the Fed's 2003 redesign of the discount window has affected banks' use of the window. The data show that while the discount window remains stigmatized and relatively little used outside periods of funding market stress, secondary credit has at times played a role in supporting bank recovery and resolution, as envisioned by the 2003 redesign. This development raises a policy question: has the two-tiered design of the discount window implemented in 2003, in which a lending facility for sound banks operates alongside one for weaker banks, served to stigmatize primary credit by association with secondary credit?

Suggested Citation

  • McLaughlin, Susan, 2024. "Policy Note | Discount Window Stigma: What's Design Got to Do with It?," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 6(3), pages 587-596, March.
    • Handle: RePEc:ysm:ypfsfc:v:6:y:2024:i:3:p:587-596
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    Keywords

    banking; central banking; crisis management; financial institutions; financial stability; liquidity; LOLR;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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