Chapter 9: Exigent and Unusual Circumstances: The Federal Reserve and the US Financial Crisis
9. Exigent and unusual circumstances:* The Federal Reserve and the US financial crisis Christian A. Johnson** INTRODUCTION In response to the greatest economic upheaval experienced by the US economy since the Great Depression, the Board of Governors of the Federal Reserve System (the Federal Reserve), through the Federal Reserve Bank of New York and other Federal Reserve Banks, embarked upon a series of unparalleled and unprecedented actions, repeatedly injecting hundreds of billions of liquidity into the US credit markets. Some of the most innovative approaches occurred during the extraordinarily volatile months of September and October of 2008. Measured in the tens and hundreds of billions of dollars, all of the actions were bold and innovative, providing fodder for decades of academic debate and discussion. This chapter focuses initially on the economic carnage facing the Federal Reserve as it contemplated how to deal with the crisis. It will then address the different tools employed by the Federal Reserve to contain the different crises and financial fires, especially those experienced during the months of September and October of 2008, and will quantify how much liquidity was injected under each of the different programs and facilities employed by the Federal Reserve.1 Finally, the chapter will discuss the actions of the US Congress in the aftermath of the crisis with respect to the ** Section 13(3) of the Federal Reserve Act. ** Professor, University of Utah College of Law. The initial research for this chapter was developed for and presented at the W.G. Hart Workshop...
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