Macro Musings with David Beckworth · Monday, August 31, 2026
Donald Kohn recounts the Federal Reserve's response to the 1987 stock market crash, highlighting Alan Greenspan's decision to issue a reassuring statement and ensure liquidity. Kohn describes the market as being in total chaos, with uncertainty about payments.
“So the stock market went down 22% in one day. I've talked to people who were in the market during that day, and they said it was total chaos. No one knew who was going to get paid, who wasn't, etc.”
“We issued the Fed issued a statement saying, your nation's central bank is going to supply all the necessary liquidity in this emergency situation.”
“So reassuring people, then doing it. So making sure the discount window was open, making sure open market operations were aware of any demands for reserves and met those things.”