Invoking emergency powers not used since the 1930s, the Federal Reserve also found ways to provide liquidity to critical parts of the shadow banking system, including securities dealers, the commercial paper market, money market mutual funds, and the asset-backed securities market.
For today’s purposes, my point is not to review this history but instead to point out that, in its policy response, the Fed was relying on well-developed economic ideas that have deep historical roots. 5 The problem in this case was not a lack of professional understanding of how runs come about or how central banks and other authorities should respond to them.