That auction scared the Fed. Finally...finally, the Fed realized that they had gone too far for too long being too tight on the money supply in their effort to burst the housing bubble.
The credit crunch had grown so severe that investors weren't even buying T-Bills!
Suddenly, the Fed decided that the screams from the Secondary Market about a "credit crunch" were real, after all.
Fed monetary policy eased mid-meeting after that point. I had already started my countdown to the point of no return being on October the 15th (had the Fed not injected money into the system prior to then, it would have been 1929 all over again).
The U.S. was pushed to the brink of economic collapse. It was a "near run thing" to quote a late Civil war general.
the treasury auction (and a phone call from Goldman Sachs’s CEO) must be what caused Bernake to turn 180 degrees and lower rates