Discount Window Treatment Apr 2026

(2024): Explores why banks use the window outside of crises, noting that smaller banks with illiquid portfolios are the most frequent users.

Despite Fed efforts to encourage usage, the DW remains heavily stigmatized. discount window treatment

(2025): Uses laboratory experiments to show that once a facility is stigmatized, it is extremely difficult to "cure" that perception, even with policy changes. (2024): Explores why banks use the window outside

Banks often choose to pay high premiums (e.g., 13–44 basis points above the DW rate) to borrow from private markets rather than use the Fed, simply to avoid appearing financially weak. simply to avoid appearing financially weak.