We mentioned that banks are reluctant to borrow from the Fed’s discount window because it’s looked down on by other banks: Other banks think that if a bank needs to use the discount window, it’s probably not very healthy. So where you get your loans is a signal about what kind of bank you are. Which of the following would seem like bad signs? If you think one or more of the cases are ambiguous, explain.
a. Your friend borrows money from a federal student loan program.
b. Your friend borrows money from a payday loan store.
c. Your friend pays for ordinary living expenses by borrowing with her credit card.
d. Your friend borrows money from her parents.
e. Your friend borrows money from an illegal loan shark.