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

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  • Christopher J. Neely

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 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 cases of the stock market crash of 1987, the Russian default and the September 11th attack are studied.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2003-034.

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Date of creation: 2003
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Publication status: Published in Federal Reserve Bank of St. Louis Review, March/April 2004, 86(2), pp. 27-42
Handle: RePEc:fip:fedlwp:2003-034

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Keywords: Money supply ; Monetary policy;

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Cited by:
  1. Daniel L. Thornton, 2009. "The Fed, liquidity, and credit allocation," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 13-22.
  2. Schüder, Stefan, 2011. "Monetary policy trade-offs in a portfolio model with endogenous asset supply," MPRA Paper 32019, University Library of Munich, Germany.
  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.
  4. Sauer, Stephan, 2007. "Three Liquidity Crises in Retrospective: Implications for Central Banking Today," Discussion Papers in Economics 2011, University of Munich, Department of Economics.
  5. Charles Gerena, 2006. "Federal Reserve : Initiation by fire," Econ Focus, Federal Reserve Bank of Richmond, issue Fall, pages 2-5.
  6. Schüder, Stefan, 2011. "Monetary policy trade-offs in a portfolio model with endogenous asset supply," Center for European, Governance and Economic Development Research Discussion Papers 127, University of Goettingen, Department of Economics.

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