The Federal Reserve sharply increased its provision of short-term liquidity to financial institutions, the U.S. Treasury injected capital into banks, and the Federal Deposit Insurance Corporation (FDIC) guaranteed bank liabilities. The Federal Reserve and the Treasury each took measures to stop a run on money market mutual funds that began when a leading fund was unable to pay off its investors at par value.
Throughout the fall and early this year, a range of additional  BIS Review 145/2009  1  initiatives were required to stabilize major financial firms and markets, both here and abroad. 1 The ultimate purpose of financial stabilization, of course, was to restore the normal flow of credit, which had been severely disrupted.