THE THREAT of a "financial crisis" may have motivated the Federal Reserve Board's apparent decision to relax monetary policy earlier this year. Such crises have been a recurrent theme since the mid-1960s, although definition of the term and prediction of the event have proved equally elusive. Corporate bankruptcies, failures in the thrift industry, problems at regional banks, and near-defaults on loans to foreign borrowers have created new concerns about the resiliency of the financial structure. The concerns are especially great because of the linkages between the health of the financial system and the growth of real economic activity. In this paper I propose to differentiate between the ebb and flow of the business cycle on the one hand, and events triggered by financial market weaknesses on the other. In that context, I evaluate recent experience in domestic and international financial markets. My conclusion is that the current episode qualifies as a full-fledged crisis of a magnitude comparable to the 1974-75 experience. The Federal Reserve is seen to play crucial roles both in the development and in the resolution of past and present crises.