According to the 1996 Mercury Grand Marquis Owner Guide :
( DOT 3 brake fluid , meeting Ford specification ESA-M6C25-A )
DOT 3
Could be the caliper or the metal line. You will have to have it checked.
At the front of the engine , towards the drivers side of the engine ( power steering fluid reservoir on a 1998 Mercury Grand Marquis )
The red " BRAKE " light in your dash means that either your parking brake is on or the BRAKE FLUID LEVEL in your brake master cylinder in the engine compartment is LOW
Your 1996 Mercury Grand Marquis may need a new transmission or something as simple as transmission fluid.
Why ? Just replace it.
According to the 2001 Mercury Grand Marquis owners manual the fuse panel is below and to the left of the steering wheel , by the brake pedal , and has a cover on it
Mercury Grand Marquis was created in 1983.
( # 16 ) is a 20 amp fuse for the cigarette lighter and OBD II in a 2007 Mercury Grand Marquis ( in the fuse panel below and to the left of the steering wheel by the brake pedal )
Into the power steering reservoir.
According to the 2004 Mercury Grand Marquis Owner Guide : ( DOT 3 brake fluid , meeting Ford specification ESA-M6C25-A is recommended ) * if DOT 3 is not available , DOT 4 can be used ( I'm not a mechanic / technician but I don't believe that both types should be in the system at the same time )
to the left of the brake pedal, mounted to the firewall.