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To: Jorj X Mckie who wrote (5714)	12/10/2002 2:14:54 PM
From: GraceZ	Read Replies (3) of 24758

does the fed ever do or say anything to/with financial institutions that might cause them to accumulate equities rather than distribute them? After 911 the Fed came out and stated that they would provide whatever liquidity that was needed to stabilize the markets and avert a panic. They did provide a huge amount of money to the system which they subsequently withdrew once the markets had stabilized. Even with this extraordinary event they did not interfere in the equity markets directly but conducted their operations in the debt markets and used public policy statements to calm the markets. 911 was an extraordinary event that required an infusion of liquidity because the normal clearing mechanisms were directly affected by the hit to lower Manhattan. Operations which would normally clear within minutes were in limbo with the loss of so many servers and high speed data connections. Their operations are thoroughly covered in the special report they published on 911 at the beginning of 2002. Does the fed ever coordinate or coincidentally time their efforts with multiple financial institutions in such a way that the financial institutions may respond in a similar manner in the same timeframe? The Fed bases it's operations on the needs of the member banks, in order to do that they need to talk to the members on a regular basis. I wouldn't doubt for a minute that some of the member banks base their operations on what they think the Fed will do. The Fed has been involved with interfering in the price of money for so long that no one actually knows what the price of money would be if it was left to market forces. It's a little like having a tiger by the tail. The institutions look to the Fed to set rates and the Fed tries to assess what are the liquidity needs of the member banks are so it can conduct it's operations. Providing liquidity and managing the money supply are what it was chartered to do. Setting the price of money in order to straighten out the extremes in the economy is where they do the most damage. What bothers me about all these discussions about the Fed and intervention that people accuse them of what they don't do and completely ignore what it is that they do that causes most of the mischief.

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