What’s The Stigma With 2.5% Loans?

Lehman Brothers and Morgan Stanley have used the Discount Window to access funds, Lehman doing so Tuesday. Goldman Sachs may use the Discount Window later this week. This is a good sign following the Fed’s announcement Sunday that investment banks can now access the Discount Window as a lender of last resort. Previously it only the Fed’s primary dealers could access the Discount Window.

That lender of last resort sentiment has created a stigma in market’s past because if a firm went to the Discount Window, it was proof they were in trouble. But if the whole market is in trouble, the Fed has admitted this by allowing investment banks to access their funds, and said funds are priced at 2.5%, the question is not so much about what the stigma is. The question is: who wouldn’t access 28 day loans at 2.5%?