Federal Reserve FAQs

Peter Hornby • August 16, 2007

As an engineer, I’ve been interested in several less-travelled aspects of the current financial crisis, mostly concerning the mechanics of how the banks and other authorities actually perform their various interventions.  You know the kind of thing -“the Fed have injected $38b of liquidity into the system”.  All well and good, but what exactly is “liquidity”, and how exactly do they go about injecting $38b of it into the system?

Via the indispensable Brad DeLong comes this reference to a FAQ put together by Steve Cecchetti, who is Professor of Global Finance at Brandeis and, as a former Executive Vice-President and Director of Research at the Federal Reserve Bank of New York, might be expected to have the answers.  He does.  Check it out.