However, although brokerages were clearly in need of additional funds to finance their activities, banks were understandably nervous about the health of securities firms in the wake of the unprecedented market movements. 9 In response, the Federal Reserve issued a statement affirming its readiness to serve as a source of liquidity to support the economic and financial system.
The Federal Reserve underscored its commitment to providing liquidity by conducting open market operations in a high-profile manner and earlier than usual. 10 The Federal Reserve also communicated with market participants to support efforts to coordinate a market response (Greenspan, 1994). 8  A discussion of this episode is in Maisel (1973); Brimmer (1989); and Mishkin (1991).