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The Federal Reserve responds to crises: September 11th was not the first

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Author Info
Christopher J. Neely

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Abstract

A primary purpose of the Federal Reserve Act of 1913 was to prevent banking panics by establishing the Federal Reserve System to function as a lender of last resort. Other types of financial crisis require a similar response, however, and the Federal Reserve has repeatedly used its capacity to generate liquidity to insulate the economy from crises in financial markets. The Fed’s response to the terrorist attacks of September 11, 2001, is the most recent example of this. This paper reviews the Fed’s responses to crises and potential crises in financial markets: the stock market crash of 1987, the Russian default, and the September 11th attacks.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2004)
Issue (Month): Mar ()
Pages: 27-42
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Handle: RePEc:fip:fedlrv:y:2004:i:mar:p:27-42:n:v.86no.2

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Keywords: Money supply ; Monetary policy;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Daniel L. Thornton, 2009. "The Fed, liquidity, and credit allocation," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 13-22. [Downloadable!]
  2. Sauer, Stephan, 2007. "Three Liquidity Crises in Retrospective: Implications for Central Banking Today," Discussion Papers in Economics 2011, University of Munich, Department of Economics. [Downloadable!]
  3. Benjamin D. Keen & Michael R. Pakko, 2007. "Monetary policy and natural disasters in a DSGE model: how should the Fed have responded to Hurricane Katrina?," Working Papers 2007-025, Federal Reserve Bank of St. Louis. [Downloadable!]
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