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

  • Christopher J. Neely

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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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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