payment system disruptions and the federal reserve following september 11, 2001 jeffrey m. lacker *...
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Payment System Disruptions and the Federal ReserveFollowing September 11, 2001
Jeffrey M. Lacker*
Federal Reserve Bank of Richmond
Conference on the Economics of PaymentsFederal Reserve Bank of Atlanta
March 31, 2004
*The views expressed are the author’s and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.
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Lower ManhattanSeptember 15, 2001Source: Space Imaging
Verizon
FRBNY
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4
Figure 1Account Balance Distribution, August 1 - September 20, 2001
0
500
1,000
1,500
2,000
8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19
99.9th 99.8th 99.7th 99.6th 99.5thPercentiles
Million $
9/11
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Figure 1Account Balance Distribution, August 1 - September 20, 2001
0
100
200
300
400
500
600
700
800
900
8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19
Source: Daylight Overdraft Reporting and Pricing System, and author's calculations
90th 80th 60th 40thPercentiles
9/11
Thousand $
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Figure 5Daily Fedwire Funds transfers for September 10-21, 2001 compared with August 2001
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Augustaverage
9/10 9/11 9/12 9/13 9/14 9/17 9/18 9/19 9/20 9/21
0
500
1,000
1,500
2,000
2,500
Volume, left axis
Value, right axis
Billion $Transactions
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Figure 5Daily Fedwire Securities transfers for September 10-21, 2001 compared with August
2001
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
AUGUST 9/10 9/11 9/12 9/13 9/14 9/17 9/18 9/19 9/20 9/21
0
500
1,000
1,500
2,000
2,500
Volume, left axis
Value, right axis
Billion $Transactions
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Figure 3Cumulative Changes in Components of Currency in Circulation from
September 10, 2001
-5
-4
-3
-2
-1
0
1
2
3
4
5
9/10 9/11 9/12 9/13 9/14 9/15 9/16 9/17 9/18 9/19 9/20 9/21 9/22 9/23 9/24 9/25 9/26 9/27 9/28 9/29 9/30
Source: FAME Database and EDDS, Board of Governors
Billion $
Vault cash
Currency outside banksCurrency in circulation
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Figure 4Currency in Circulation, 2001
530
540
550
560
570
580
590
600
610
620
630
8/5 8/12 8/19 8/26 9/2 9/9 9/16 9/23 9/30 10/7 10/14 10/21 10/28
Source: FAME Database and EDDS, Board of Governors
20
30
40
50
60
70
80
90
100
110
120
Currency in Circulation, left axis
Currency Outside Banks, left axis
Vault Cash, right axis
Billion $ Billion $
9/11
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Fed statements
Fedwire is “fully operational at this time and will remain open until an orderly closing can be achieved.” Fedwire broadcast message 9:24 am ET, 9/11
“The discount window is available to meet liquidity needs.” Fedwire broadcast message 11:25 am ET, 9/11
“The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs.” BOG press release, noon 9/11
“The Fed is the lender of last resort. If credit is needed to make transactions go, the Fed will provide it.” Governor Gramlich, to reporter in Tuscon, 9/11
“I’m sure that central bankers everywhere will do everything possible to maintain calm and seek to ensure the world economy functions smoothly in the face of this horrendous deed.”
FRBNY President McDonough, by phone from Basle, 9/11
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Table 1. Factors Affecting Account Balances of Depository Institutions, September 10-21, 2001
End of day balances, billion $
Date Term Overnight Check float Swap draws Currency Other Discount Overdrafts Balances
Sep 10 23 0 1 0 -611 601 0 0 13Sep 11 23 0 4 0 -613 595 37 2 47Sep 12 23 38 23 5 -616 585 46 4 109Sep 13 14 70 47 20 -615 577 8 0 121Sep 14 14 81 44 9 -615 578 0 0 111
Sep 17 12 57 12 0 -615 579 0 0 45Sep 18 12 36 9 0 -616 578 0 0 19Sep 19 12 28 4 0 -615 584 3 0 15Sep 20 33 7 3 0 -614 583 1 0 13Sep 21 33 1 1 0 -612 588 2 0 12
Repos Overnight credit
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Figure 5Daylight overdrafts for September 10-21, 2001 compared with August 2001
0
20
40
60
80
100
120
140
160
AUGUST 9/10 9/11 9/12 9/13 9/14 9/17 9/18 9/19 9/20 9/21
0
20
40
60
80
100
120
140
160
Peak
Average
Notes: The PEAK daylight overdraft is determined by adding the account balances of all depository institutions in a negative position for each minute during the day and then selecting the largest negative end-of-minute balance. The aggregate AVERAGE daylight overdraft is the sum of all DI's average daylight overdrafts. A DI's average daylight overdraft is the sum of negative end of minute balances divided by total minutes in the standard Fedwire operating day. August is a monthly average of the daily data.
Billion $ Billion $
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Table 2. Summary Results of Repurchase Financing, September 12-19, 2001
Date Total Props Accepted Props High Bid Low Bid Stop-Out Weighted Avg(Billion $) (Billion $)
Sep 12 46.25 38.25 3.60 3.25 3.50 3.54Sep 13 70.20 70.20 4.00 3.50 3.50 3.60Sep 14 81.25 81.25 3.75 3.50 3.50 3.54Sep 17 59.55 57.25 3.15 2.90 3.00 3.07Sep 18 37.75 36.25 2.30 1.75 2.00 2.16Sep 19 27.60 27.60 1.20 0.75 0.75 1.00
(Financing Rates for Overnight Repurchase Agreements)
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Figure 6Federal Funds Rates around September 11, 2001: High, Low, and Effective Rates
0
1
2
3
4
5
8/23 8/24 8/27 8/28 8/29 8/30 8/31 9/4 9/5 9/6 9/7 9/10 9/11 9/12 9/13 9/14 9/17 9/18 9/19 9/20 9/21 9/24 9/25 9/26 9/27 9/28 10/1 10/2 10/3
High Rate
Target Level
Low Rate
7 6Percent
Effective Rate
Source: Markets Group, Federal Reserve Bank of New York
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