Which emergency Federal Reserve action helped end the 1987 stock-market crash by providing market liquidity?

Emergency liquidity support from the Federal Reserve helped end the 1987 stock-market crash by providing market liquidity.

On October 20, 1987, Federal Reserve Chair Alan Greenspan issued a statement affirming the central bank’s readiness to serve as a source of liquidity. The Federal Reserve also encouraged banks to continue lending to securities firms, helping prevent a market panic from becoming a broader payments crisis.

The intervention did not instantly erase losses, and the Dow still finished October 1987 far below its pre-crash level. However, financial conditions stabilized, and the United States did not experience the prolonged depression that followed the 1929 crash.

This response is often described as a central-bank liquidity backstop, not a direct purchase of every falling stock. Regulators also examined market structure, including program trading and portfolio insurance, and later introduced circuit breakers.