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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 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.

Suggested Citation

  • Christopher J. Neely, 2004. "The Federal Reserve responds to crises: September 11th was not the first," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-42.
  • Handle: RePEc:fip:fedlrv:y:2004:i:mar:p:27-42:n:v.86no.2
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    Cited by:

    1. Charles Gerena, 2006. "Federal Reserve : Initiation by fire," Econ Focus, Federal Reserve Bank of Richmond, issue Fall, pages 2-5.
    2. repec:got:cegedp:127 is not listed on IDEAS
    3. 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.
    4. Schüder, Stefan, 2011. "Monetary policy trade-offs in a portfolio model with endogenous asset supply," MPRA Paper 32019, University Library of Munich, Germany.
    5. Ho, Steven Wei & Zhang, Ji & Zhou, Hao, 2014. "Hot money and quantitative easing: the spillover effect of U.S. monetary policy on Chinese housing, equity and loan markets," Globalization and Monetary Policy Institute Working Paper 211, Federal Reserve Bank of Dallas.
    6. Daniel L. Thornton, 2009. "The Fed, liquidity, and credit allocation," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 13-22.
    7. Sauer, Stephan, 2007. "Three Liquidity Crises in Retrospective: Implications for Central Banking Today," Discussion Papers in Economics 2011, University of Munich, Department of Economics.
    8. 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.
    9. Schüder, Stefan, 2014. "Expansive monetary policy in a portfolio model with endogenous asset supply," Economic Modelling, Elsevier, vol. 41(C), pages 239-252.

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    Keywords

    Money supply ; Monetary policy;

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