U.S. Federal Reserve to provide liquidity as needed
By Martin Crutsinger, Associated Press, 09/11/2001
WASHINGTON - The Federal Reserve, seeking to provide assurances that the nation's banking system will be protected following the terrorist attacks, said Tuesday 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 statement was released, 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 loses 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.
Skidmore refused to discuss whether extra security measures were being deployed to protect Greenspan in light of the attacks or when he would return to Washington.
"We don't discuss or provide details of his travel plans at any time for security reasons," said Skidmore. Greenspan travels with a security detail supplied by the Fed.
As the Fed sought to reassure the country that the nation's banking system was safe, officials at the Securities and Exchange Commission issued a statement saying that they supported the decision by stock exchanges to halt trading Tuesday.
SEC Chairman Harvey Pitt said his agency had been "in constant communications with each of our organized security markets and exchanges. As a safety precaution while the tragic events of today are sorted out, the securities markets have decided not to open for trading today."
Pitt said regulators strongly support this decision.
"It is a responsible course of action in light of the current situation. We are continuing to monitor the situation, along with the securities markets, and investors should be assured that the disruption to normal trading patterns is a temporary phenomenon; trading will resume as soon as it is practicable to do so. We will keep the public advised," Pitt said.
At the Treasury Department, officials announced that the regular weekly auction of four-week bills that was scheduled for Tuesday would be delayed until Wednesday. The Treasury Department, next to the White House, was evacuated after the report of a plane crashing into the Pentagon.