A bar chart showing average daily discount window borrowing for the weeks ending August 1, 2001 to â¦ Even when banks face acute liquidity shortages, they often appear reluctant to borrow at the New York Fedâs discount window (DW) out of concern that such borrowing may be interpreted as a sign of financial weakness. Question: The ÊºstigmaÊº Is Related To A. Abstract. A â¦ Wed, February 10, 2016 . In March, the Fed released the details of its lending during the financial crisis, under court order. A figure with two panels. Borrowing At The FEDÊ¹s Discount Window B. The banks' concern was that their recourse to the discount window, if it became known, might lead market participants to infer weakness -the so-called stigma problem.â â¦ This phenomenon is often called âDW stigma.â In this post, we explore possible reasons why banks may feel such stigma. Introduction. The term originated with the practice of sending a bank representative to a reserve bank teller window â¦ â Bernanke (2009) 1. Discount Window Stigma. Figure 1. The banks' concern was that their recourse to the discount window, if it became known, might lead market participants to infer weaknessâthe so-called stigma problem. The discount window is a tool that the Federal Reserve has long used to increase the stability of the financial system, but some believe its effectiveness is diminished by stigma: institutions may avoid borrowing from it out of concern that they may be perceived as being in weakened financial condition. In sum, the discount window is a vital tool to maintain the uninterrupted functioning of the banking system, but its effectiveness may be limited by the stigma associated with using it. Discount window borrowing around the September 11, 2001 terrorist attack and the August 14, 2003 east coast blackout. In sum, the discount window is a vital tool to maintain the uninterrupted functioning of the banking system, but its effectiveness may be limited by the stigma associated with using it. The discount window is an instrument of monetary policy (usually controlled by central banks) that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions. Participation In The Federal Funds Market C. Running A Current Account Surplus D. Borrowing At The TreasuryÊ¹s Discount Window === The Mandate For The Monetary Policy Goals That Has Been Given To The PeopleÊ¹s Bank Of China Is An Example Of â¦ In August 2007,â¦banks were reluctant to rely on discount window credit to address their funding needs. Discount Window Lending, Secrecy, and Stigma This story is months old, but received some attention in the last week. Discount Window Stigma: An Experimental Investigation âIn August 2007,â¦ banks were reluctant to rely on discount window credit to address their funding needs. We provide empirical evidence for the existence, magnitude, and economic cost of stigma associated with banks borrowing from the Federal Reserve's Discount Window (DW) during the 2007-2008 financial crisis. The first is its failure to resolve the problem of stigma--that is, the stigma â¦ Figure 1A. There are nonetheless three major sources of concern about potential weaknesses in the new framework for financial crisis management that has been introduced since the Great Financial Crisis. Stigma and the discount window Accessible Data. This explains why policies that aim at dealing with the stigma of discount window borrowing are so important. Stanley Fischer .