payments coordination by which banks use incoming payments to fund their own transfers to other banks. once a number of banks began to be short of incoming payments, some became more reluctant to send out payments themselves. in effect, banks were collectively growing short of liquidity. we recognized this disturbing trend toward illiquidity in the pattern of funds movement among the accounts held by commercial banks at the federal reserve. before september 11, banks held approximately $ 13 billion in their fed accounts. in the days after september 11, these balances ballooned to more than $ 120 billion because some banks could not move funds out of their accounts. the large buildup of federal reserve account balances was limited to only a few banks, but it meant that a number of other banks were running huge negative positions in their federal reserve accounts and needed to find other sources of liquidity before the close of business. further evidence of disruption in the flow of payments among banks at this time is quite clear from data for the federal reserve ’ s large - value electronic payment system, known as fedwire. banks use fedwire to make payments to one another to settle their customers ’ as well as their own transactions. just before september 11, the number of transfers sent over fedwire on a normal day was around 430, 000, with a total value of $ 1. 6 trillion. on september 11, the number of transfers was down more than 40 percent, with fewer than 250, 000 transfers being sent over fedwire, and the total value was down 25 percent. if liquidity had continued to dry up, both business and consumer confidence could have been severely affected. imagine businesses unable to promptly withdraw funds from checks deposited in their banks, even though those checks paid for goods or services already provided. imagine international banks running out of dollars, a serious impediment to international trade and finance. as we know now, the situation never reached those extreme conditions because, fortunately, the federal reserve system has numerous means providing liquidity. one tool used to provide needed liquidity was the discount window, through which the fed lends in certain circumstances to help banks maintain smooth day - to - day operations. in essence, in more normal times the discount window serves a function similar to that of a pressure valve. during the crisis, as the volume of borrowing requests increased dramatically, the discount window served as something closer to the floodgates of a great dam. on september 12, lending to banks through the discount window totaled about $ 46

##tagion effects from asia, the influence of developments in u. s. financial markets, or home - grown causes. whatever the answer, and the answer may be all of the above, this phenomenon illustrates the interdependencies in today ’ s world economy and financial system. perhaps it was inevitable that the impressive and rapid growth experienced by the economies in the asian region would run into a temporary slowdown or pause. but there is no reason that above - average growth in countries that are still in a position to gain from catching up with the prevailing technology cannot persist for a very long time. nevertheless, rapidly developing, free - market economies periodically can be expected to run into difficulties because investment mistakes are inevitable in any dynamic economy. private capital flows may temporarily turn adverse. in these circumstances, companies should be allowed to default, private investors should take their losses, and government policies should be directed toward laying the macroeconomic and structural foundations for renewed expansion ; new growth opportunities must be allowed to emerge. similarly, in providing any international financial assistance, we need to be mindful of the desirability of minimizing the impression that international authorities stand ready to guarantee the liabilities of failed domestic businesses. to do otherwise could lead to distorted investments and could ultimately unbalance the world financial system. the recent experience in asia underscores the importance of financially sound domestic banking and other associated financial institutions. while the current turmoil has significant interaction with the international financial system, the recent crises would arguably have been better contained if long - maturity property loans had not accentuated the usual mismatch between maturities of assets and liabilities of domestic financial systems that were far from robust to begin with. our unlamented savings and loan crises come to mind. these are trying days for economic policymakers in asia. they must fend off domestic pressures that seek disengagement from the world trading and financial system. the authorities in these countries are working hard, in some cases with substantial assistance from the imf, and the world bank, and the asian development bank, to stabilize their financial systems and economies. the financial disturbances that have afflicted a number of currencies in asia do not at this point, as i indicated earlier, threaten prosperity in this country, but we need to work closely with their leaders and the international financial community to assure that their situations stabilize. it is in the - 4interest of the united states and other nations around the world to encourage appropriate policy adjustments,