Precedents, Instruments and Targets that the Fed Has Used to Create and Support a Postcrisis Global Safety Net

Much has been made of the Global Safety Net that has been put into place since the Great Financial Crisis but the distributional effects of some of the Fed's strategies are still shrouded in mystery. In supplying bailout funds at below-market terms to uninsured creditors of firms and governments that were economically insolvent, the Fed reinforced the implicit expectation that megabanks are free to take on high levels of risk and benefit from the upside while being protected from any serious downside. An important example of this is the role of currency swaps. By extending its "temporary" dollar swap lines with other central banks, including the European Central Bank, "until further notice" the Fed broadcasted its intention to act as the financial world's "liquidity provider" of last resort. The "liquidity" support provided by the Fed to megabanks through cross-border lending in fact acted as subsidies, the costs of which were borne for by ordinary US citizens. This is just one piece of an unacknowledged game plan of building global strategies of crisis prevention and crisis management on misdirection and piles of bullsh*t.