and lending standards on business loans. in addition, market reports indicated that the capital markets were seizing up as dealers and other marketmakers recoiled from risk taking. in response, the federal open market committee ( fomc ) lowered its target for the federal funds rate 75 basis points in three equal steps and maintained the lower rate through june of the subsequent year. this response mainly reflected fomc concerns that these financial instabilities had either signaled or created significant downside risks to the economic outlook, particularly for business investment. the fomc's significant aversion to the possible negative outcomes associated with these risks was part of a risk - management perspective - - that is, that the economic recovery from a financial shock could be more difficult to manage than the financial shock itself. as for events after 1998, it is more difficult to identify a " pure " financial crisis. the devastating terrorist attacks in 2001 caused tragic loss of life and major damage to the physical infrastructure of a number of key firms central to trading and market - making activities. although there were many important differences, this crisis mimicked a financial meltdown in the sense that important financial markets could not operate because of the cessation of activities by some firms. the federal reserve responded in a manner that was appropriate to the nature of the crisis. we issued a statement that we were up and running and ready, if needed, to extend loans from the discount window. depository institutions took up the offer ; their borrowing surged to more than $ 45 billion but dropped quickly after a few days. we also worked jointly with foreign central banks to provide funds to promote the smoother operation of foreign exchange transactions and established swap lines that channeled funds to institutions that needed dollars. in addition, the federal reserve took a variety of other actions, including waiving daylight overdraft fees, extending the operating hours for fedwire, and easing the limits on securities lending to reduce the pressure on firms requiring securities that were made scarce because of settlement difficulties. all these measures were taken quickly, maintained temporarily, and wound down in an orderly manner as the need for them receded. after the initial rush of activity, we focused on the nonfinancial economy. evidence of a weakening economy had already emerged before the terrorist attacks ; the decline in stock prices, the widening of risk spreads, and the impairment of market functioning created by the attacks caused many policymakers to worry that this weakening would accelerate. again reflecting the risk - management perspective i described earlier

jerome h powell : coronavirus and cares act testimony of mr jerome h powell, chair of the board of governors of the federal reserve system, before the committee on financial services, us house of representatives, washington dc, 30 june 2020. * * * chairwoman waters, ranking member mchenry, and other members of the committee, thank you for the opportunity to testify today to discuss the extraordinary challenges our nation is facing and the steps we are taking to address them. we meet as the pandemic continues to cause tremendous hardship, taking lives and livelihoods both at home and around the world. this is a global public health crisis, and we remain grateful to our health - care professionals for delivering the most important response, and to our essential workers who help us meet our daily needs. these dedicated people put themselves at risk day after day in service to others and to our country. beginning in march, the virus and the forceful measures taken to control its spread induced a sharp decline in economic activity and a surge in job losses. indicators of spending and production plummeted in april, and the decline in real gross domestic product, or gdp, in the second quarter is likely to be the largest on record. the arrival of the pandemic gave rise to tremendous strains in some essential financial markets, impairing the flow of credit in the economy and threatening an even greater weakening of economic activity and loss of jobs. the crisis was met by swift and forceful policy action across the government, including the coronavirus aid, relief, and economic security act ( cares act ). this direct support is making a critical difference not just in helping families and businesses in a time of need, but also in limiting long - lasting damage to our economy. as the economy reopens, incoming data are beginning to reflect a resumption of economic activity : many businesses are opening their doors, hiring is picking up, and spending is increasing. employment moved higher, and consumer spending rebounded strongly in may. we have entered an important new phase and have done so sooner than expected. while this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check. while recent economic data offer some positive signs, we are keeping in mind that more than 20 million americans have lost their jobs, and that the pain has not been evenly spread. the rise in joblessness has been especially severe for lower - wage workers, for women, and for african americans and hispanic