By Richard C. Auxier, TaxVox / April 8, 2016

Don't say the nation's capital never does anything for you. Thanks to a District of Columbia (DC) holiday, the IRS moved Tax Day back three days to April 18 this year.
Since 1955, April 15 has served as Tax Day in the United States, but the IRS can delay the filing deadline when it coincides with a holiday. While there is no national holiday on April 15, there is one in DC. Since 2005 the city has celebrated Emancipation Day on April 16, recognizing the date in 1862 when President Lincoln signed the DC Compensated Emancipation Act and abolished slavery in the District—eight months before the Emancipation Proclamation. When April 16 falls on a Saturday, as it does this year, DC observes the holiday on Friday, April 15.
While the federal government does not honor Emancipation Day, the IRS recognizes it as a "legal holiday" because it’s observed in DC. As such, they moved Tax Day to the next Monday and gave all Americans an extra three days to complete their 1040s. (Residents of Maine and Massachusetts get yet more time because they celebrate Patriots Day on April 18, but the rest of the nation does not benefit from that local holiday.)

Moving Tax Day back a few days is not only a victory for procrastinating Americans, it's also a role-reversal for DC, which has a complicated and often one-sided relationship with the federal government. Because the Constitution grants Congress authority over the District "in all cases whatsoever," federal lawmakers often meddle with DC's government. Congress has used its authority to block DC laws on marijuana, abortion, and clean-needles. Until a court ruling this March, DC could not even spend its own budget funds on anything without congressional approval, putting its tax dollars and government spending in limbo every time Congress got into one of its budget spat. And the federal government will probably never allow DC to tax the income of nonresident commuters who work in the city. Not to mention the 670,000 residents of DC that still don't get a vote in Congress.
But every few years DC gets to flip the script and push back the federal government's Tax Day, providing filers throughout the country a brief reprieve. So give DC a thank you.

This article first appeared in TaxVox

As the April 18th deadline nears and the volume of returns filed continues to increase at the IRS, please submit returns and extensions as early as possible to allow for additional turnaround time that could be required for acknowledgements from the IRS or state taxing agencies. 
For returns to be filed in the days immediately prior to the deadline, we encourage preparers to consider filing an extension even when you anticipate completing the return by April 18th.  Filing an extension will help should issues be experienced at the Federal or state agencies, or if circumstances beyond your control prevent the return from being completed by the deadline.
Note: Taxpayers in Maine and Massachusetts will have until Tuesday, April 19, because of Patriot’s Day observances on April 18

Getting calls from your own number?
       From the Federal Trade Commission   July 7, 2015   by Bikram Bandy,  Do Not Call Program Coordinator, FTC

It’s like a scene out of a strange sci-fi movie. You get a call, look at the caller ID, and see that your own number is calling. Weird! No, this isn’t an alternate reality where your future self is calling the present you. It’s a scammer making an illegal robocall. 

Technology makes it easy for scammers to fake or “spoof” caller ID information. They can make it look like they’re calling from a different place or phone number. Even your number. Scammers use this trick as a way to get around call-blocking and hide from law enforcement. They hope you’ll be curious enough to pick up. Don’t fall for it.

The real callers could be calling from anywhere in the world. We’ve written about these kinds of tricks before — like when scammers pretended to be the IRS and faked caller ID so people thought it really was the IRS calling.

Bottom line? These calls from your own number are illegal. Don’t pick up — or press buttons to be taken off the call list or to talk to a live person. That just leads to more calls. It’s best to ignore them, and move on with your day. Maybe watch a really good sci-fi movie.

Are you bad at money management?  You can change that. How do you know if you're bad with your money? Here are eight reasons why you might be terrible at money management, and eight ways to change your habits for good.                               By Andrea Karim, Wise Bread          From the Christian Science Monitor – July 6, 2015  

Perpetually broke? Always holding your breath when you run your credit card, worried your balance has finally tipped over the limit? Living paycheck-to-not-quite-the-next-paycheck?

Some people are bad at money. (I should know — I used to be one of them.) But you don't have to be that way forever. Here are eight reasons you suck at money — and how to fix them.

1. You're an Impulse Spender
A little retail therapy is fine and dandy, if it's not a chronic issue that causes you financial distress. Had a rough week? Sure, a splurge on a new pair of running shoes or a shade of lipstick that is inappropriate for work can offer a quick (and temporary) pick-me-up, assuming you have the cash to spare. But if you don't, then retail therapy is a bad idea. Actually, spending just to make yourself quickly feel better is almost always a bad idea.
If you just had a baby and hate the way your body looks (I know nothing about this, shut up), then an expensive haircut and a bottle of self-tanner aren't actually going to fix the problem, although they may distract you from the issue for a day or two. If you hate your job, binge-buying a ton of video games may entertain you in your off-time, but won't actually make your working hours any more bearable.

How to Fix It
Check yo'self before you wreck yo'self if retail therapy is a regular habit. At the very least, try to determine exactly what the problem is, find the root of it, and address it head-on. If you need more education to land your dream job, then you should be focusing your finances on that, rather than on needless entertainment.

2. You're Unprepared or “Lazy”
I waste a lot of money on take out. It's not that I don't like cooking — because I do — but that I am truly terrible at meal planning and buying groceries accordingly. When I was single, eating was simply a matter of buying a fresh loaf of bread and some good cheese and maybe some cheap wine, but now I have to feed a whole family, it's become a little more complex.
Or perhaps you find yourself paying through the nose for services, like yard or home care, that you could do yourself. There's nothing inherently wrong with paying someone else to perform work for you, as long as you can afford it, but if your budget is stretched, then cutting back makes sense.

How to Fix It
Find ways to make the necessary work more bearable. If it's meal planning, take a look at websites and meal planning apps that help you plan, shop, and cook. Enlist the help of your favorite music while cleaning and doing laundry. Get a lawn mower that works. I had to spend $400 to find a lawn mower that I could start, but that's still cheaper than paying someone to come and mow my lawn every week or so.

3. You Had Bad Money Role Models
Maybe your parents were terrible at money and you learned their bad money habits. It can be hard to break out of this mold if you've been shaped by it since childhood, since old habits die hard. But if you want to put yourself in a better financial situation, you need to forget what you learned growing up and start fresh. Fortunately, it's never too late to learn good money management skills.

How to Fix It
The internet is your friend when it comes to money management. You can peruse personal finance websites (like this one!) or take a free online course in money management.


4. You Had No Money Role Models
Maybe no one ever taught you the basics of money management and you've been winging it poorly. (Incidentally, back when I was in school in the last millennium, Home Economics courses taught us how to sew and how to microwave eggs, but never mentioned budgeting.)
Parents often believe that they are doing their children a favor by not exposing them to the dirty business of money management. While understandable, the notion is misguided. Sometimes families have to tighten their belts to make ends meet, and it's not wrong to explain to children why they can't go to the movies every weekend.

How to Fix It
If you have kids, you can break the cycle of financial silence by allowing your kids to participate in planning meals and family budgets. Although learning basic money management skills can seem daunting when you're an adult, getting the whole family onboard can make it less grueling.

5. You Try to Keep up With the Joneses
Maybe you idolize people who have a lot, and believe that buying things is the only way to be happy. Or maybe you've just bought into the idea (haven't we all?) that you need to have at least as much as your neighbors in order to fit in.
Humans are social creatures, and we tend to care deeply about what our peers think of us. This is, of course, why many advertisers sell an image of who you can be when you buy their product, rather than just selling the actual product.

How to Fix It
Just like occasional shopping sprees, there's nothing inherently wrong with wanting to impress other people, but buying things specifically for the sake of shaping someone else's opinion of you is silly, especially if you don't really need what you are buying. Before you buy anything, ask yourself, "Would I spend money on this if I knew that no one else would ever see it?"

6. You Are the Joneses
Or at least… you were the Joneses, until financial circumstances changed, and your spending habits didn't.
Perhaps you lost your job and now you have to scramble to make ends meet for a while. It doesn't matter that people once envied your brand new car and constantly updated wardrobe; what matters now is putting food on the table and paying the bills. A part of your new life involves adjusting budgets and expectations to meet reality.

How to Fix It
You might find that changing your spending habits is as simple as cooking at home instead of dining out, or learning not to shop as much. Some downsizing might be more serious, like reducing the number of cars that you own or learning to live in a smaller house. Regardless of the size of changes that you have to make, you'll do well to learn to let go of the past and accept the present.

7. YOLO
Hey, I'm totally in favor of living for the moment, but that doesn't mean that you can't save for the future. And while you can't take it with you when you die, you're going to need those savings to help you out in old age (sure, it might seem far away now, but you'll be amazed at how time flies once you hit your 40s).

How to Fix It
Part of the joy of being young is taking calculated risks and enjoying the freedom that comes from a relative lack of responsibility. But that doesn't mean that you have to struggle with money — money problems are a stressor, and nothing ruins the fun like stress. Learning to live within your means while young is smart, and it's also easier than trying to learn when you are older.

8. You Have Really Bad Luck (or Dumb Relatives)
Not everyone in a lousy financial situation got there through bad habits. I happen to be good friends with a couple who continually ends up having to empty their savings because their families are financially irresponsible, and they find themselves having to bail out spendthrift siblings or medically challenged parents.
Medical bills are a major cause of bankruptcy in the U.S.; even people with health insurance can end up losing all of their savings on expensive treatments. Even Medicare and Medicaid don't cover the full cost of many treatments — my own mother recently went through both chemotherapy and radiation to treat cancer, and would have paid much more out of pocket if she hadn't purchased supplemental health insurance to cover what Medicare would not.

How to Fix It
There's not much you can do when calamity strikes, other than to pick up the pieces and learn from any mistakes (like gaps in insurance coverage). But you can prepare by having emergency savings on hand and being adequately insured.

Ten Things to Know about Identity Theft and Your Taxes

Learning you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.

Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.

The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.

Here are ten things to know about ID Theft:

1. Protect your Records.  Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.

2. Don’t Fall for Scams.  The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.

3. Report ID Theft to Law Enforcement.  If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.

4. Complete an IRS Form 14039 Identity Theft Affidavit.  Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit.  Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.

5. Understand IRS Notices.  Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.

6. IP PINs.  If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.

7. Data Breaches.  If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft.  Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.

8. Report Suspicious Activity.  If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

9. Combating ID Theft.  Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years.   During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft.  Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before. 

10. Service Options. Information about tax-related identity theft is available online. We have a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

For more on this Topic, see the Taxpayer Guide to Identity Theft.

Additional IRS Resources:

• Publication 5027, Identity Theft Information for Taxpayers
• Publication 5199, Tax Preparer Guide to Identity Theft
• Publication 4524, Security Awareness-Identity Theft Flyer
• Publication 4523, Beware of Phishing Schemes

IRS YouTube Videos:

• Are You a Victim of Identity Theft? – English | Spanish | ASL
• Protect Yourself From Identity Theft – English | Spanish | ASL
• IRS Identity Theft FAQ: First Steps for Victims – English | Spanish | ASL
• IRS Efforts on Identity Theft – English | Spanish | ASL
• IRS Identity Theft FAQ: Going After the Bad Guys – English | Spanish | ASL
• Phishing-Malware – English | Spanish | ASL

IRS Podcasts:

• Are You a Victim of Identity Theft? – English | Spanish
• Protect Yourself From Identity Theft – English | Spanish

TRANSPOSITION ERROR
When two adjacent numbers are transposed, the resulting mathematical error will always be divisible by 9 (e.g. (72-27)/9 = 5). Bank tellers can use this rule to quickly find their errors in many cases. Transposition errors also occur in accounting firms, brokerages and all other areas of finance.

The Astonishing Story of the Federal Reserve on 9-11

Sep 10, 2014 7:30pm PDT  from dailykos.com  by bunnygirl60  See  arlissbunny.wordpress.com   also http://www.goodreads.com/book/show/19168026-the-smart-bunny-s-guide-to-debt-deficit-and-austerity

It is impossible for me to begin to write anything about the events of 9-11 without first bowing my head and taking a moment of silence in remembrance of all those who died and the grief which still lives on in the soul of our nation. Since I will be writing here about the genuinely heroic acts it took to save the economy on that day, I should mention that 74% of all civilian casualties were from the financial community. This represented not only wonderful people (I elect to think the best of them all) but of significant expertise in some of the most esoteric areas of our monetary system. In particular the staggering loss of six hundred fifty-eight employees by the largest securities interdealer broker, Cantor Fitzgerald, sent shockwaves through the industry that were and are still being felt.

I didn’t intend to write a piece about 9-11 or to devote my Thursday spot on the Netroots Radio program The After Show to this subject. In fact, I had planned to spend this week on the thrilling topic of the discount window. It was plain old curiosity that took me to the internet to find out what the Federal Reserve did on 9-11. As it turns out, it was not an easy story to unravel and between late Sunday night when I first started reading and Tuesday night when I started writing I read several hundred pages of reports as well as the tiny amount of media reporting available. Here’s the thing I didn’t know and I’ll bet you a wheelbarrow of carrots you didn’t either, on 9-11 and the days which immediately followed, a relatively small number of people did some genuinely, physically heroic things in order to keep the economy from going off the rails and none of them were named Alan Greenspan.

In order to piece this story together I read all of the 2001 Annual Reports of all twelve of the Federal Reserve Banks, congressional testimony and speeches by members of the Board of Governors, white papers by economists yawn, and a handful of accounts in the media. If you have the time grab some kale chips and kick back with the 2001 Annual Report for the Federal Reserve Bank of Chicago, it reads like a thriller and includes photographs of some of the Chicago team who made all the difference during those days of chaos and fear. The Government and Finance Division of the Congressional Research Service of the Library of Congress also produced a truly fine report prepared by Gail Makinen, The Economic Effects of 9-11: A Retrospective Assessment.

Hop below the fold for a story which is both astonishing and moving. I promise. It’s also really long but you won’t regret reading through to the end. I promise that too.

On the morning of 11 September 2001, when Federal Reserve Vice Chairman Roger W. Ferguson, Jr. arrived at work in his office in the Federal Reserve Bank in Washington, DC, he was alone. I don’t mean there weren’t other people in the building it’s just that it was a busy day and all the other members of the Fed Board of Governors who are normally in Washington were traveling. In fact, Ferguson was the only member of the Board who was anywhere near the District. Alan Greenspan, the Chairman of the Fed, along with William J. McDonough, President of the Federal Reserve Bank of New York (which is, in case you didn’t know, the first among equals in the Fed system) were both in Zurich, Switzerland at a meeting of central bankers. Actually, it was worse than that, Greenspan was on a commercial plane in route back to the US and was out of contact with his staff. (Remember, this was before wifi was available on flights.)

Ferguson, considered a deliberative and thoughtful man by his staff, settled into his office and turned on his television to keep track of the markets. When the second plane hit the World Trade Center no one had to tell Ferguson, he knew the country was under attack and he already knew that the attack was aimed at the financial backbone of the world, lower Manhattan. Ferguson declared an emergency and all over the Fed stunned staff found assurance in going through emergency procedures for which they had prepared. The Joint Y2K Committee Ferguson had so recently headed proved to be a windfall of emergency planning and the entire Fed system referred back to those decisions and the associated training throughout the 9-11 crisis. By the time employees could all hear the muffled thump coming from the direction of the Pentagon and smoke could be seen out the windows the staff had secured themselves and the premises and they had started to organize their war room. The President, George W. Bush, was still reading a children’s book.

At 9:25AM ET the Federal Aviation Administration ordered all planes grounded.

Even as all of Washington dithered between evacuating or sheltering-in-place fearing the rumored fourth plane, Ferguson was already worrying about the next disaster, the crash of the entire US financial system. Within forty-one minutes of the second plane hitting the World Trade Center Ferguson issued as simple clear statement, via Fedwire, to all member banks and institutions assuring them that the federal fund transfer system was “fully operational” and that Federal Reserve Banks would “stay open until an orderly closing could be achieved.” In other words, we are here and we are fully functional. And that was just the first 41 minutes. Alan Greenspan was still on a plane with no knowledge of events and the President was just getting to Air Force One.

Greenspan’s plane was one of the lucky ones. Instead of being grounded in Iceland, Greenland or Newfoundland as had so many other international flights, Greenspan’s flight was able to return to Zurich. He had no idea why until the plane landed some time later.

Meanwhile, things at the Federal Reserve Bank of New York weren’t just chaotic, they were terrifying. Even before the first tower fell Protection staff had locked the vaults, secured the facility and cleared the street in front of the Fed for emergency vehicles. Key personnel equipped with special frequency radios were in touch with the FedNY back-up location in New Jersey letting staff know that there was an emergent situation and to prepare for accepting the operational responsibility of the Bank. Down in the lobby Protection staff began to pull in injured pedestrians so that they could be treated by on-site Fed medical personnel and as the towers fell this trickle of pedestrian refugees became a flood.Someone on the physical plant team thought to turn off the ventilation systems immediately in order to preserve the air quality inside the building and Fed staff handed out face masks and wet paper towels to ash-covered survivors. Housekeeping staff divided their efforts between cleaning up as much of the ash as possible near the entry points where it was worst and cleaning the cafeteria. Incredibly, by noon the cafeteria was up and running and was providing beverages and snacks to the refugees, until they were able to evacuate, and then meals to staff and emergency responders. The Fed continued to feed fire and police personnel around the clock. The FedNY also provided space for first responder trauma counseling, a service much needed and much used during those early days.

Back in Washington, DC the capitol area was under an evacuation order. Most FedDC staff left but about one hundred remained to help Ferguson run the Bank. By now employees knew that at least one other plane had been bound for Washington but still they remained. Ferguson had reached out and spoken with members of the Board and the Federal Open Markets Committee (FOMC) and by noon the Fed publicly released a statement which proved to be both elegant and powerful in effect,

The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs.

I know, it doesn’t sound like much but if you are JP Morgan Chase Bank and you have not only had to evacuate your primary clearing facility but may well have entirely lost it, this statement translates to, “We are in this with you. Let us know what you need and we will back up the dump trucks of money.” Bankers everywhere took a tiny breath and thought, probably for the first time that day, their bank might live to see the close of business. You see, only a handful of banks were directly effected but among them were the Bank of New York (BoNY) and Chase so the resulting earthquake would shake almost all banks due to the interrelated structure of the industry. Chase and BoNY, among many other critical functions, hold the clearing accounts for one hundred percent of the primary dealers and interdealers for the securities market. It was fortunate that Chase was already in the process of moving its clearing operations to Florida. While it appears they have never heard of global climate change they were able to resume operations to an increasing degree as the week went on. The BoNY was harder hit and their ATM network crashed and remained down until the 19th. (BoNY did refund all customers the fees associated with using the ATMs of other banks.)

As far away as the Federal Reserve Bank of Chicago non-essential employees were also evacuating and the back-up location was being warmed up. The Fed in Chicago is one short block from the Sears Tower and while others around the country may not remember, Chicago was very much in fear of attack. Chicago staff decided not to shift to the back-up because they knew that DC and NY would need them and they felt the time it would take to move was not time the system could afford. Gordon Werkema, a Vice President at the Chicago Fed said, "Closing the Fed would be like shutting down the fire department because there are too many fires." From their offices in Washington the Department of the Treasury Office of the Comptroller of the Currency (OCC) had issued a statement saying that banks around the nation could close early at their discretion. Several in the neighborhood of the Sears Tower took them up on it.* In the war room of the Chicago Fed one employee wrote, “JUST THE FACTS” up on the white board at the front of the room. It was going to be that kind of day.

[*Bank of America and Wachovia, both located in tall towers in Charlotte, NC, also elected to close for the day and, wisely, erred on the side of employee safety.]

When Seven World Trade Center fell steel I-beams scissored into a major Verizon communications hub. Switching equipment which handled 40% of the land lines in lower Manhattan and 20% of the lines for the New York Stock Exchange (NYSE) were instantly cut. This included all their internet, voice, PBX and data lines. Other providers were also hit though none quite as deeply. That the FedNY was still up and running was a tribute to their (clearly smarter-than-your average-bear) IT staff who had managed to keep the computers and networks functioning, for the most part, with intended emergency systems working as planned. During the Ferguson-led  Y2K emergency planning it was determined that key employees should carry two cell phones from two different providers and pre-load them with a master list of phone numbers including their key co-workers, key bank customers, banking regulators, utility service providers and the like. In many cases they had multiple numbers for specific contacts at each organization. It was this kind of planning which proved invaluable at all the Fed Banks across the country. That essential people were able to reach one another was a significant cog in the process. For those that the Fed, in particular the NYFed, were unable to locate, industry organizations stepped in and tracked down their people linking them back to the Fed and freeing Fed employees to put out other (metaphorical) fires.

Elsewhere in lower Manhattan virtually every bank and financial institution was forced to evacuate. This included the New York Stock Exchange, the Nasdaq, which was closed for the very first time, and the New York Mercantile Exchange. The American Stock Exchange, known as “the curb”, had been located in the Towers and the New York Board of Trade had been in Four World Trade Center. Both were now without a home but still had their people. In the surrounding area 18,000 small businesses were disrupted, damaged or entirely destroyed. Outside of the US, other exchanges, including London, closed out of an abundance of caution. The money markets and foreign exchange markets were seriously disrupted but did manage to stay open throughout the day.

In Chicago the Fed had their back-up ready, just in case, by 10:30 AM. They remained in constant touch with Fed officers around the country including Jack Wixted, Chicago’s Vice President of Supervision and Regulation (S&R), who had been in Washington, DC for a meeting and was now assisting Ferguson, Chicago’s Senior Vice President and CFO, Carl Vander Wilt, who happened to be at the NYFed for a meeting and stayed to assist through the long day there and two of Chicago’s S&R staffers who were in San Francisco at the Fed where they managed to get a rental car to drive the long way home. All the Fed branches were able to communicate with one another throughout the entire crisis.

Back in Washington Ferguson was only just getting started. Alan Greenspan, finally on the ground and with a phone in his hand, had called Ferguson and told him that he “trusted him” and that he knew Ferguson would make the right decisions. Ferguson immediately got out every tool in the Fed’s great big tool box and brought them all to bear opening up the taps of liquidity.

First up was the discount window. The Federal Reserve Act of 1914 was intended to bring stability and flexibility the financial system through the creation of the Federal Reserve Bank and sets as one of its objectives the necessity to “furnish elastic currency.”  Certainly this was well in evidence during the week that followed 9-11. Each Fed Bank was instructed to reach out to all their depository customers to find out if and how much they would need to borrow from the discount window on the night of the 11th. Fed Banks across the country had staff working until midnight to help banks make assessments and close their day. Interestingly, during Y2K planning the Fed had arranged with depository institutions to set aside some pre-pledged collateral and it was against these emergency funds that most banks drew thus saving the time and the regulatory checking usually necessary. [If you want to learn more about the discount window that will be the subject of my segment of The After Show next week on Thursday morning. If I’m lucky I’ll get time to write a diary as well.] As a point of reference, in the year preceding 9-11 the discount window averaged $200 million dollars in lending a night. On 9-11 that jerked up to $37 billion, then to $46 billion on the 12th. The thing that made this level of lending acceptable was that the need for the lending was driven not by insolvency but rather by true liquidity and this was the very sort of problem for which the Fed’s “elastic currency” capability was intended.

Ferguson had also directed and communicated that Fedwire would remain open until 10:45PM ET but even the significant extension of time did not change the fact that many banks were not yet in a condition to communicate. The illiquidity of banks became evident when, by the close of the Fedwire day, transfers were down by more than 40%. The NYFed New Jersey back-up site had taken over NYFed Fedwire operations on 9-11, leaving the remaining core team to deal with larger issues including the fact that commercial paper (short-term loans) due to roll-over on the 11th or 12th were unable to do so. An example of why this was problematic was seen up at the Chicago Fed where a large customer and employer was due to roll-over one of these loans and use the profit for payroll. With the markets closed and access to normal liquidity choked off, the Chicago Fed, who had staff in direct touch with this company, made a loan not to a bank but directly to the corporation involved. Repayment was made immediately after markets reopened.

In New York, once it was deemed relatively safe, all non-essential FedNY staff left but a core continued on despite extraordinary conditions and worked only three blocks away from what was now Ground Zero. They worked until nearly midnight making discount window loans to customers who, themselves, were staggering into their back-up facilities, shaking off the ash and trying to save their banks. This FedNY core team stayed through to Wednesday afternoon when the fire department finally required them to evacuate due to fears that the One Liberty building would collapse on the them.

As the core employees left the NYFed all around them they could see not only the dangers and tragedy of the day but the obvious logistical issues which would have to be resolved before they or any of the rest of the financial industry would be able to return to their primary facilities. Thousands of phone lines were cut, including the Verizon lines described above. Debris damaged or destroyed not just the area right around Ground Zero but the ash had floated into electronics and buildings air systems making them non-functional. Fires and water also left their mark. Transportation and power joined telecommunications in being seriously compromised. Even more directly applicable to the financial industry was the fact that while most companies had back-up sites they had never tested all those sites working together. Beginning as early as 9-11 itself, the IT team at the NYFed started working with customers to get them back into communication with the industry. IT staff worked around the clock throughout the week and all through the extensive weekend testing for the NYSE and the Nasdaq in order to ensure that trading could resume on Monday, the 17th. They were assisted in this by employees of Verizon, Con Edison and FEMA. FEMA, the State of New York and the City of New York also prioritized sending structural inspectors out to verify the integrity of any buildings which were in question.

The staff at Chicago Fed, like all the branches across the country, was working twelve to sixteen hour days and many worked those hours straight through the weekend. Different Fed branches have different areas of expertise. Chicago Fed, due to its proximity to the Chicago Board of Trade and the Chicago Mercantile Exchange, was given the responsibility for collecting data and coordinating with the futures markets. Chicago also has the Customer Relations & Support Office (CRSO) for the entire Fed system. Every Fed depositor has a “personal” Fed CRSO banker and each person in customer support has access to multiple ways to reach their prime designated contact at all of the fifty largest banks in the country. This allowed Fed customers to deal directly with people they already knew and who already knew them. When it came to calming fears and providing liquidity options, this person-to-person approach proved to be invaluable. CRSO also kept their webmaster busy adding constant updates to their website so that all Fed customers would have access to the most current information immediately. Like so much of the Chicago Fed, CRSO employees stayed each night until 11PM in order to assist their customers with daily closing. Even more determined than that were the Chicago loan officers who kept the discount window open until midnight and then came back and did it all again for the next three days.

On top of everything else, Chicago had banks who needed to be resupplied with cash and though the Fed had plenty on hand they could not get armored truck carriers to come into downtown Chicago due to fears, fanned by the media, associated with the Sears Tower. With banks beginning to run low and one bank needing as much as $1.2M right away, Chicago Fed employees found “alternate methods” of getting the currency delivered within two hours.

Ferguson and his team in Washington remained in close contact with Fed branches around the country and were only too aware that another tsunami of a problem was beginning to break. The Federal Reserve had, at that time, a fleet of aircraft that moved 46,000 pounds of checks around the country each day to be processed at the various clearing centers. The fleet also delivered new currency from the Bureau of Engraving and Printing to the Fed branches. Yep. That’s what they did. And all of them were grounded by the FAA. (It seems to me, a mere rabbit, that some sort of conversation might have been appropriate…?) So here’s what used to happen when the Fed planes didn’t fly. Checks that were drawn on banks other than the bank of the person who wrote them got flown around, delivered to the appropriate Fed branch, processed and cleared into the receiving bank. Lots of those checks were tiny but some of them were huge. Therefore, some banks had way too much money in their accounts, from checks written but not cleared out, and others were way too short, from checks not yet cleared in. In the ten months prior to 9-11 there had been a total of $766M in check float. Between 9-11 and the 17th there was $150B in check float. Though used in an unprecedented way, check float is a positive liquidity action and represents just another creative way the Fed found to pump money into the economy when needed. Usually, of course, the Fed charges what amounts to overdraft fees for float since it constitutes an implicit, non-collateralized loan, but Ferguson made sure banks knew that they would not be punished for conditions which were out of their hands. In 2014, of course, the percentage of physical checks being written has dropped dramatically and a very high percentage of transactions are by EFT but 2001 was still all about paper.

The biggest aspect of the check float issue was that by allowing this previously untried tool to leverage the economy, the Fed was able to keep consumer confidence in the banking system in tact and avoid any serious runs on banks. Businesses and individuals alike continued to be able to access their money via the normal methods. The only exceptions to this were that in some locations either banks or ATMs ran short of  currency while waiting for the Fed to deliver more. By the weekend of the 15th and 16th banks actually had higher than normal amounts of currency in their vaults because armored trucks had delivered cash (finally!) but consumers decided to stay home for the weekend and didn’t withdraw the normal amount of “weekend” money.

Which brings me to the next problem–paper. The trading between securities dealers, called interdealer trading, begins with repos (repurchase agreements) at 7AM and then the interdealer securities start selling at about 8AM. By 9AM interdealer trading is done. This meant that on 9-11 by the time the towers were attacked the trading day had nearly finished. Located on floors 101 to 105 of One World Trade Center was Cantor Fitzgerald, the single largest interdealer broker, who alone controlled 25% of the volume in securities. On 9-11 $500B in repos and $80B in securities had been traded but the settlement instructions were burned when American Airlines Flight 11 exploded into the tower only two floors below. In most cases, the only side of the trade data that remained was with the company on the other side of the trade. In some cases even that was problematic. As traders everywhere began to worry the Fed instructed regulators to work with dealers to determine the original instructions as best as could be done and for regulators to sign-off accordingly. This work was painstaking and it took many weeks to complete. Fed regulators worked many long, over-time hours to accomplish this task in as timely a manner as possible. In days to come the Fed further provided auditors with special instructions regarding materials/data entirely lost in the disaster.

Perhaps the most staggering story within the general financial community is about Cantor Fitzgerald. Obviously, the tragic deaths of 658 of their 960 New York employees was devastating in many, many ways. Cantor Fitzgerald Chairman, Howard Lutnick, whose brother was among the victims, was however resolved to bring the company back and when trading resumed, on the 17th, with the help of their London office, Cantor was again trading. Lutnick pledged to give twenty-five percent of the profits of the company to the families of the employees for each of the next five years. This resulted in a distribution of $180M with an additional $17M raised by a charity set-up by the Lutnick family. Cantor also paid for the health insurance for the families of these employees for ten years following 9-11. In case you missed it, that was $180M which was NOT distributed to partners in the firm but to families instead.

As the new day, the 12th, dawned the FedNY back-up site was up in New Jersey was running and ready for the tumult of work that was coming. Alan Greenspan had come back to Washington on a special military flight and the FOMC, which he chaired, ordered the Desk to buy every proposition offered for sale at the Federal funds rate. The Desk is the arm of the Fed, located at the NYFed, which handles all the Open Market Operations (OMOs), the buying and selling of US Treasury instruments. Translation of the FOMC directive? Every authorized primary dealer who offered to sell the Fed treasuries was accepted. This is never the case in a normal day and, in fact, on 9-11 prior to the crisis the FOMC had already decided not to either buy or sell anything (called, cleverly, “taking no action”). Because of the attack the Desk was unable to trade on 9-11 regardless. On the 12th by buying back Treasuries the Fed was effectively pouring liquidity out into the economy through a truly huge pipe. Where it is normal for the Fed to view OMOs through the lens of what is best for the Treasury, during a crisis the lens is reversed and the Fed views all OMO transactions based upon being of advantage to the dealers. In the three days following 9-11, the Desk purchased $190B in Treasuries and $8.75B in repos and they stayed open until nearly midnight so that dealers would have time to assess their positions. Additionally, since many dealers did not have the normal communications capabilities in their back-up sites, the Desk worked manual systems (ie telephone, pen and paper) to accommodate all sellers. In a speech given in 2003 at Vanderbuilt University, Ferguson describes the employees on the Desk during that time as having “performed heroically in running the open market operations.”

As in Chicago the previous day, other members of the NYFed team worked to get additional currency delivered to banks in Midtown and elsewhere in the NYFed’s region. ATM withdrawals were up 31%, which was to be expected, and the Fed had plenty of currency available. What it did not have was armored car companies willing to make the pick-ups or deliveries. This problem was resolved when employees from the back-up office coordinated with police from New York and New Jersey to bring $425M in from New Jersey to shore up banks that were low. Between Tuesday, 9-11 and Sunday, the 16th about $5B in currency was distributed around the country by Fed branches which was, all things considered, quite reasonable. Fortunately, credit card processing was unaffected nationwide and while most consumers stayed home and did not spend, increased spending was noted in groceries and gas, the latter presumably because flights were grounded and because in times of uncertainty people like to have a full tank in case they need to evacuate suddenly.

Also running low on currency were several foreign banks and financial institutions with branches in the US. They were requesting dollars from their “home” central banks but the banks didn’t have enough. In order to address this unusual situation, the Fed arranged currency swaps with the Bank of England and with the European Central Bank. The Bank of Canada also requested an increase in the ceiling of their currency swap agreement from $8B to $10B. A currency swap is when a foreign central bank agrees to give us X amount of their currency in trade for Y amount of our currency. In a given amount of time later, perhaps a month, they return our currency to us plus the Federal funds rate and we return their currency to them. Ultimately, between the three central banks, $90B in currency swap agreements were signed creating additional liquidity as needed.

As per the quiet and consistent Fed leadership out of Washington, all branches of the Fed continued to aggressively inject as much liquidity into the financial system as the system requested. Further, the Fed encouraged member banks to work closely with any of their customers directly effected by 9-11 and added that it was recognized that the banks may need to expand their balance sheet and/or extend unusually favorable terms. The Fed provided its S&R teams with directives to work closely with banks and to provide all necessary assistance within the law. This, of course, upends what is (supposed to be) an adversarial relationship and it was widely commented upon (approvingly) by the financial industry at the time.

While all of the Fed monetary tools remained fully engaged between the 11th and the 14th, it was the check float which caused the most concern because it was so far outside the norm. The Federal Reserve Bank of Atlanta, which had just opened their new facility earlier in the year, manages both currency operations for the entire Fed system and also includes the Fed Retail Payments Office which includes FedACH (automatic, electronic check processing). Obviously, the check float tsunami was storming in their direction in a big way. Their solution was to go back to basics. They got out maps of the country (“See, dear, I TOLD you that AAA membership would come in useful.”) and while some employees were creating a hub and spoke system for driving checks around the country, other staffers were contracting with trucking companies. Still other members of the team were coming up with a way to perform “check triage” so that high value checks and those traveling a long distance would move through the system first.

By Friday, when the Fed fleet was once again cleared to fly nearly seventy-five percent of the checks which had backed up had been delivered via ground transportation to the correct Fed branches. The rest arrived throughout the day on Friday and Saturday. Employees at the new check clearing center at Chicago Midway, where most checks from the Midwest processed at that time, describe Friday afternoon as “the dam break(ing).” Bags of checks were piled high and were everywhere. Employees could not see over the piles.

Senior Processor, Andrew Hall, said, “We started to wonder when they were going to stop. Right after you made a dent and could see over a pile of checks more would come.” Chicago alone processed more than six million checks over the weekend. Hall added, “The newer people were helped by the more experienced ones. We pulled together and got it done.”

“We pulled together and got it done,” could have been the theme song for the week throughout the Fed system and no where was that more in evidence than the Fed’s cooperation with the Securities and Exchange Commission and in conjunction with the President’s Working Group, utility companies, FEMA, city and state officials, industry groups and other various stakeholders to get the New York Stock Exchange, the Nasdaq and the New York Mercantile Exchange back up and ready for operations on the 17th. It was considered absolutely essential that the markets open smoothly and it was a given that volume was going to be exceptionally high. Any operational glitch, it was feared, might indicate a systemic weakness and was deemed unacceptable. All parties involved worked through the weekend testing systems and then testing them again trying to be certain that the, in many cases, temporary networks would remain stable. Daily press conferences were held to keep anyone who was interested in the loop. Everyone involved anxiously awaited the opening bell and the expected electronic shock wave of transactions to follow.

The sun rose on Monday morning the 17th and, in Washington, the FOMC had met and prior to the opening of the markets released a statement announcing that the Federal funds rate was being reduced from 3.5% to 3.0%.

The statement went on to say, “The Federal Reserve will continue to supply unusually large volumes of liquidity to financial markets, as needed, until more normal market functioning is restored. As a consequence, the FOMC recognizes that the actual funds rate may be below its target on occasion in these unusual circumstances.”

Because, as modern monetary theory economists have been explaining for some time now, only the Fed can create money/liquidity out of thin air and it does this both during the extraordinary times and the mundane.

By the time the bell rang on Wall Street the markets were off to the races. By the closing bell a record shattering 2B shares had been traded with virtually no malfunctions. The NYSE was joined on its floor by the newly homeless specialist traders of the American Stock Exchange (AMEX) who were welcomed to function as floor brokers. The most impressive accomplishment of the NYSE was that a mere nineteen short days after 9-11 normal trading volumes and patterns had returned. The market had calmed.

It should not go without saying that the futures markets, except those located in New York, did resume normal operations on the 13th. The New York Mercantile Exchange was able to get back into their site and re-open on the 17th and the New York Board of Trade, made homeless by the events of 9-11, relocated to their Queens back-up site and re-opened reasonably smoothly on the 17th as well.

In the days and weeks which immediately followed 9-11 analysts drew together important data and lessons (hopefully) learned which inevitably came out of this shared, national experience. The first and most important is that our monetary system, with its redundancies and unusually diverse brain trust was able to absorb a blow intended to, quite literally, disintegrate it. Great human tragedy was not magnified by a financial meltdown which would have spread another form of tragedy nationwide. The virtue of the Feds great big toolbox and the way in which all the tools interact with one another during a crisis was in evidence daily. Certainly, no other organization within the government was positioned to respond as quickly and to reach as deeply down into the fabric of the emergency as was the Fed. Not to be underplayed was also the value the Fed had come to place on person-to-person relationships. On a day when “trust me” really meant something the Fed was able to draw upon well established positive relationships in order to keep the economy of the United States and of the world moving.

But never, ever, should we forget the cost of that day not only in irreplaceable human lives but in the 430,000 jobs that were lost, $2B in lost wages, the $36B in clean-up cost, $30.3B in lost GDP to the City of New York, the cost for the new World Trade Center which continues to rise well past $20B, the insurance claims of $40B and all of that is before the additional cost of homeland security and, the worst of it all, the trillions of dollars and the precious, precious blood of our soldiers given in two wars.

Still, while our President was posing for photo ops and our Vice President was hiding under a mountain, colleagues of Roger Ferguson speak of him as having been “cool under fire without being overbearing” and they praise him saying he “nailed it” when it truly mattered. Kenneth A. Gunther, President and CEO of the Independent Community Bankers of America, said, “The Federal Reserve’s response on September 11th ensured a fully functioning payments system when the private sector could not…. The Fed’s dual roles [as provider of services and regulator of the payments system] are an essential element of the ongoing homeland security of the United States.”

Personally, I like best what Jerry Jordan, President of the Federal Reserve Bank of Cleveland said to his people on the 11th,

In responding to this crisis, don’t think of yourself just as a representative of our Bank but as central bankers of our nation.

Arliss Bunny, appears on dKos as bunnygirl60, and can be found on Twitter as @ArlissBunny. She is the author of The Smart Bunny’s Guide to Debt, Deficit and Austerity available as an e-book on Amazon. Her new book, The Smart Bunny’s Guide to Government Spending, is expected out this Fall.

10:10 PM PT: WOW!!! blush Thanks to all for your kindness in recommending this diary to the "Recommended List". I am honored.

Thu Sep 11, 2014 at 6:18 PM PT: When I posted this diary I thought, because it was so long and on the subject of the Federal Reserve, that about four people would struggle through to the end. I am absolutely overwhelmed by the response. It has inspired me. You have inspired me. Thank you one and all.

I’m going to be on the radio again ~~ what fun!   As a (new) member of Think Local First, our local independent business association ( http://www.thinklocalfirst.net ), I will be interviewed by Lucy Ann Lance this coming Monday, June 3, 2013 at between 9:40 and 10 am (I believe the time is accurate….)

You can stream it here, if you are interested:  There will be a link in the future that I will throw up on my website as well.
http://player.streamtheworld.com/_players/citadel/?sid=22759

Ann Arbor AM Station 1290 WLBY, Ann Arbor's Business Talk Radio 
http://lucyannlance.com/

More information from the Think Local First Newsletter:

THINK LOCAL FIRST & THE LUCY ANN LANCE BUSINESS INSIDER  SHOW!

Hear what is happening at Think Local First every Monday on The Lucy Ann Lance Business Insider Show! We will discuss what is happening in the local movement including new members, events and other relevant items. This is an exciting opportunity for us to share with the community what we are working on and reminding folks about why our message is important to the community they live and work in. Plus we will feature a guest member each week to share what makes their business unique and different. Click on this link to hear past interviews.

Remember to tune in to 1290 AM on Mondays at 9:40 A.M. to hear the latest
regarding Think Local First. And tune in Monday through Friday at their new time from 8 a.m. to 11 a.m. to hear about all things local. "The Lucy Ann Lance Show" (Saturday) and "The Lucy Ann Lance Business Insider" (weekdays) always focuses on what is happening in and around town. Their Saturday show remains on the air from 9 a.m. to noon. To learn more visit www.lucyannlance.com!

Upcoming participants include:

Monday May 20th - Our event at Ann Arbor Cooks is coming up on May 23rd and Callan Loo of Peaceful Crossings who is presenting is stopping by to explain legacy planning for businesses and why it is important to you! Tune in to hear why you might want to come and learn more!

Monday June 3rd - As many small business owners know finding a good bookkeeper can be problematic. Tune in to meet Penny Corbett the owner of Jorn Count Associates specialize in this category. Think accounting is boring? Maybe, but you'll still want to know about this service!

A wonderful event -- Senior Living Week of May 10 - May 19, 2013 -- Exposition with tables and presentations from service providers related to seniors in the Washtenaw County area.  An amazing amount of useful information and guidance from the housing opportunities throughout the county to services such as mine (personal bookkeeping) as well as services for the blind, for veterans, transportation, home services to help with independent living, and many more.  The University of Michigan Housing Bureau for Seniors has been hosting this event annually for a number of years.  http://www.med.umich.edu/seniors/events/shaw.htm

$1,378 saved over 52 weeks. 

A wonderful idea to save painlessly -- and have $1,378 at the end of each year.  For the first half year, you are saving less than $100/month; then for the next few months, up to (finally) $250/month. 

Put aside the amount of each week into a savings account.  Don't spend it until the end of the year, or continue to save into the next year for a larger amount.

If you have discretionary funds available, you can do the same for an IRA or other retirement or education savings.  The trick is to simply do it, and allow it to grow.  Makes so much more sense than spending funds ahead of saving them, on a credit card for example, and then incurring fees of various kinds.