Archive for Tuesday, September 11, 2001

EXTRA - Fed acts to calm markets

Greenspan assures money availability

September 11, 2001


— The Federal Reserve, seeking to provide assurances that the nation's banking system will be protected following the terrorist attacks, said today it stood ready to provide additional money to banks if needed.

"The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs," the Fed said in a two-sentence statement.

The promise to supply additional money to the banking system was similar to a pledge that the Fed issued on the morning after the October 1987 stock market crash, when the market plunged by more than 500 points in one day of trading.

That statement in 1987 was given a large amount of credit for helping to restore calm to badly shaken financial markets.

Before the latest statement was released Tuesday morning, Fed officials had said that Greenspan was out of the country attending a banking conference in Switzerland but was being kept apprised of developments.

Federal Reserve Vice Chairman Roger Ferguson, the No. 2 official at the Fed, was monitoring banking and financial market developments along with a team of top Fed officials.

The 1987 crash occurred only two months after Greenspan was sworn in as Fed chairman. He received a large amount of praise for his handling of that financial crisis.

His quick response in letting banks know that they should keep lending despite the huge losses investors had suffered on Wall Street was credited with helping spur a stock market rebound.

While the October 1929 stock market crash in which the Fed cut back on lending to banks ushered in the Great Depression of the 1930s, Greenspan's quick response in 1987 helped to stabilize the stock market and keep the country out of a recession.

Fed spokesman Dave Skidmore said Greenspan was taking part in a regularly scheduled meeting of the Bank for International Settlements in Basel, Switzerland.

The bank serves as a coordinating body for central banks around the world.

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