Did the Federal Reserve help European banks to overcome the financial crisis?

The aim of the paper is to analyze the stock market reaction and the CDS market reaction to the usage of the FED liquidity programs by European banks. We analyze whether the usage of the liquidity programs was perceived as an opportunity for the banks to overcome the liquidity crisis or as a signal of a harmful illiquidity position. We show that the financial markets first perceived the TAF program as positive, but that a very early usage – in the two first weeks – as a late usage generates a stigma effect. Conversely, the CPFF, the PDCF and the TSLF programs announcements are negatively perceived; the first usage of CPFF and TSLF were somehow stigmatizing, whereas, at last, the usage of these three programs is perceived as useful for European banks to overcome the liquidity crisis. We also show that financial markets react positively to discount window loans and to the implementation of Bank Central Swap Lines.