Can Discount Window Stigma Be Cured?
![close up photo of the federal reserve building](https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2024/05/LSE_2024_disount-window_armantier_460.jpg?w=920)
One of the core responsibilities of central banks is to act as “lender of last resort” to the financial system. In the U.S., the Federal Reserve has been operating as a lender of last resort through its “discount window” (DW) for more than a century. Historically, however, the DW has been plagued by stigma—banks’ reluctance to use the DW, even for benign reasons, out of concerns that it could be interpreted as a sign of financial weakness. In this post, we report on new research showing that once a DW facility is stigmatized, removing that stigma is difficult.