T he Bank of Japan began an operation in mid-September to supply U.S. dollars to institutions participating in the Tokyo money market, including foreign banks and brokerage houses. This operation, part of a joint effort by central banks around the world to fight the credit crunch that followed the collapse of the U.S. housing market, was made imperative by the fact that interbank lending of dollars — a basic component of the financial system — broke down.
As globalization accelerates the cross-border movement of goods, money and resources, the need for a coordinated operation of this type suggests that the Federal Reserve Board — the central bank of the United States — has become unable to perform one of its main functions: supplying dollars.
Central banks are responsible for supplying their own currencies and being lenders of last resort. On the other hand, the job of supervising banks, including their overseas branches and other units, rests with the financial authorities of the home countries.