Payment system disruptions and the federal reserve following September 11, 2001

The monetary and payment system consequences of the September 11, 2001, terrorist attacks and the Federal Reserve's response are reviewed. Interbank payment disruptions appear to be a central feature of many US banking crises, and interbank payment disruptions seem likely to recur. Federal Rese...

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Bibliographic Details
Published in:Journal of monetary economics 2004-07, Vol.51 (5), p.935-965
Main Author: Lacker, Jeffrey M
Format: Article
Language:English
Subjects:
Banking crises
Banking industry
Central bank,Federal reserve
Central banks
Credit policy
Daylight credit
Discount window
Economic impact
Economic theory
Fear
Federal Reserve monetary policy
Finance
Monetary economics
monetary policy
Organized crime
Payment system
Payment systems
September 11
September 11 terrorist attacks-2001
Studies
Terrorism
U.S.A
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Summary:The monetary and payment system consequences of the September 11, 2001, terrorist attacks and the Federal Reserve's response are reviewed. Interbank payment disruptions appear to be a central feature of many US banking crises, and interbank payment disruptions seem likely to recur. Federal Reserve credit extension following September 11 succeeded in massively increasing the supply of banks’ balances to satisfy the disruption-induced increase in demand and thereby ameliorate the effects of the shock. Relatively benign banking conditions helped make Fed credit policy manageable. An interbank payment disruption that coincided with less-favorable banking conditions could be more difficult to manage, given current daylight credit policies. Paying interest on reserves would facilitate improvements in daylight credit policy.
ISSN:0304-3932
1873-1295
DOI:10.1016/j.jmoneco.2004.04.005