Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The total amount outstanding on the network of dollar swap lines reached its peak in December 2008 at $580 billion. Briefly, the swaps touched 35 percent of the Fed’s balance sheet. But even these gigantic figures do not do justice to the scale of the program. The essence of the swap line was to provide easy access to short-term dollar funding. With the New York Fed and its counterparts across the world working on a hectic schedule, new dollar funding was flushed into the system on a daily basis. In a single week in late October 2008, as dollars previously sourced from American money markets hemorrhaged out of the global banking system, the Fed lent $850 billion through the swap lines. It was this circulation of funds that allowed the Bank of England, the ECB and the Swiss National Bank to meet huge demands for dollars without running down their exchange reserves to even more critical levels. But for the swap facilities, between September 2008 and May 2009, monthly demand for dollars at the auctions organized by the ECB would have wiped out its reserves several times over.