Final answer:
The Term Auction Facility (TAF) was created by the Federal Reserve to help banks access credit without the stigma associated with the discount window during the 2007 financial crisis. Hence, the correct answer is option 4.
Step-by-step explanation:
In order to overcome the stigma that might come from borrowing from the Federal Reserve following the 2007 financial crisis, the Federal Reserve created the Term Auction Facility (TAF). The TAF was designed as an innovative way to provide short-term credit to banks during periods of exceptional market stress. Importantly, the TAF was separate from the discount window, which had traditionally provided loans to banks but carried a stigma of financial weakness if used.
The Federal Reserve implemented multiple tools to address the financial crisis, including quantitative easing (QE), which involved the purchase of long-term government and private mortgage-backed securities, but QE was a policy adopted later in response to continuing recessionary pressures and not the initial tool to counteract stigma.
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve responsible for open market operations and setting the target federal funds rate, and while it plays a crucial role in monetary policy, it was not created as a direct response to the stigma associated with borrowing from the Fed during the crisis.