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MNI BRIEF: Mandate No Cure For Discount Window Stigma-NY Fed

Proposals calling for mandating regular use of the Federal Reserve's discount window might ensure readiness in times of crisis, but are unlikely enough to break the facility's long stigma, according to a New York Fed blog published Friday.

"In particular, our results suggest that the latest proposed reform, mandating regular DW borrowing, may ensure operational readiness, but it may not be sufficient to break stigma," the New York Fed's Olivier Armantier wrote. "In fact, our finding that even extreme interventions, such as making the DW free, may not fully cure stigma raises the question of whether there is any hope of removing the stigma already attached to the Federal Reserve’s DW."

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Proposals calling for mandating regular use of the Federal Reserve's discount window might ensure readiness in times of crisis, but are unlikely enough to break the facility's long stigma, according to a New York Fed blog published Friday.

"In particular, our results suggest that the latest proposed reform, mandating regular DW borrowing, may ensure operational readiness, but it may not be sufficient to break stigma," the New York Fed's Olivier Armantier wrote. "In fact, our finding that even extreme interventions, such as making the DW free, may not fully cure stigma raises the question of whether there is any hope of removing the stigma already attached to the Federal Reserve’s DW."

Keep reading...Show less