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Managing Stigma during a Financial Crisis

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Abstract

How should regulators design effective emergency lending facilities to mitigate stigma during a financial crisis? I explore this question using data from an unexpected disclosure of partial lists of banks that secretly borrowed from the lender of last resort during the Great Depression. I find evidence of stigma in that depositors withdrew more deposits from banks included on the lists in comparison with banks left off the lists. However, stigma dissipated for banks that were revealed earlier after subsequent banks were revealed. Overall, the results suggest that an emergency lending facility that never reveals bank identities would mitigate stigma.

Suggested Citation

  • Sriya Anbil, 2017. "Managing Stigma during a Financial Crisis," Finance and Economics Discussion Series 2017-007, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2017-07
    DOI: 10.17016/FEDS.2017.007
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    File URL: http://www.federalreserve.gov/econresdata/feds/2017/files/2017007pap.pdf
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    Cited by:

    1. Metrick, Andrew, 2022. "Broad-Based Emergency Liquidity Programs," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(2), pages 86-178, April.

    More about this item

    Keywords

    Great Depression; Central bank; Financial crisis; Stigma;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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