By Liz Hoffman and David Benoit
The country's biggest banks said they borrowed from the Federal Reserve's emergency-lending fund, not out of panic but to remove the public stigma of doing so in case the economic fallout of the coronavirus gets worse.
JPMorgan Chase & Co., Bank of America Corp. and six other big banks said late Monday they had tapped the Federal Reserve's pool, known as the discount window. People briefed on the move said the borrowings were relatively small and weren't used to address any critical funding shortfalls.
Banks relied heavily on the Fed window during the 2008 financial crisis, when they struggled to stay solvent as markets cratered. They all but abandoned it in recent years, even though the Fed offers some of the cheapest funding available, out of concern that it would paint them as weak.
By acting as a group now, the banks have strength in numbers. The same eight firms used each other for air cover on Sunday when they announced they would suspend their stock buybacks -- another move that, at a single firm, could have signaled severe stress.
Last month, before the coronavirus outbreak wreaked havoc on the markets, JPMorgan Chief Executive James Dimon said the bank would start using the window again. "We think it's time," he said at the bank's investor day. "We think it's a good idea and will help remove the stigma."
In a statement, the group -- which also includes Wells Fargo & Co., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, Bank of New York Mellon Corp. and State Street -- said they had "substantial liquidity and multiple sources of funding."
But cracks have shown in parts of the money market, the short-term funding that keeps the lights on overnight at financial institutions and other companies. Bank stocks have tumbled over the past week on fears that they aren't prepared for what could be a sustained period of market tumult, followed by a lengthy recession.
The Federal Reserve has offered cheap funds to keep banks liquid and avoid panic. And on Sunday it said it would purchase $700 billion of government bonds, another salve for a choppy market.
Fed officials have pressed banks to use the window more regularly, concerned that their unwillingness to use it was disrupting the movement of money around the financial system. On Sunday, the Fed slashed the interest rate on discount-window loans to further encourage banks to use it.