Journal Article
Liquidity effects of the events of September 11, 2001
Abstract: Banks rely heavily on incoming payments from other banks to fund their own payments. The terrorist attacks of September 11, 2001, destroyed facilities in Lower Manhattan, leaving some banks unable to send payments through the Federal Reserve's Fedwire payments system. As a result, many banks received fewer payments than expected, causing unexpected shortfalls in banks' liquidity. These disruptions also made it harder for banks to redistribute balances across the banking system in a timely manner. In this article, the authors measure the payments responses of banks to the receipt of payments from other banks, both under normal circumstances and during the days following the attacks. Their analysis suggests that the significant injections of liquidity by the Federal Reserve, first through the discount window and later through open market operations, were important in allowing banks to reestablish their normal patterns of payments coordination.
Keywords: Fedwire; Bank liquidity; Payment systems; War - Economic aspects; Electronic funds transfers;
Access Documents
File(s): File format is application/pdf https://www.newyorkfed.org/medialibrary/media/research/epr/02v08n2/0211mcanpdf.pdf
Authors
Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Economic Policy Review
Publication Date: 2002
Volume: 8
Issue: Nov
Pages: 59-79