
Deutsche Bank reveals role in 9/11 liquidity facility
US dollars were effectively locked into the US clearing system, and the foreign exchange markets were also short of US dollars for the same reason. Deutsche Bank’s idea, which was also backed by large French banks including BNP Paribas, was to allow euros deposited with European central banks to be withdrawn in US dollars at the prevailing exchange rate by US customers of the European banks that were short of liquidity.
Banks significantly tapped the facility while it operated on Thursday, September 13, and Friday, September 14 and were charged a spread by the European Central Bank, with withdrawals charged at the Federal funds rate.
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