The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
But everyone knows that financial market stability is an "unlegislated" mandate of the Fed as well. The ingenious aspect of the Fed's response to panic in the market was in the timing. To wit:
1) On the third Saturday of every month, index options expire. Those options stop trading at the end of business on Thursday, and the index settlements are determined based off the opening prices on Friday.
2) The equity market hit new lows on the afternoon of August 16th (Thursday), which also coincided with a spike in the VIX to 37.5.
3) The Fed's policy response was released after the index options stopped trading but before the index settlements were determined.
4) The most leveraged way to play any market is through options, and one would imagine that short-sellers (long puts, short calls) and "long vol" plays were very instrumental in driving the market lower and vol higher.
5) By acting between the end of trading and settlement, the Fed "hung the shorts out to dry" as equities rallied over 5% and vol dropped about 30% as a result of the announcement.
The response can therefore be seen as a warning shot to short-sellers, assuming that the Fed believes that "unfettered" short selling drives up volatility and therefore damages the credit market even more.
In addition, the Fed didn't even use the most famous tool in their monetary policy tool chest: the official Fed Funds target. They get to save that for when economic, not just market, conditions warrant it. And it also gives Mr. Bernanke a another notch in his credibility belt, which never hurts.