Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Every cent of this staggering flow of funds was repaid in full. Indeed, the Fed made profits of c. $4 billion on its swap lending in 2008–2009. But this sober accounting understates the drama of this innovation. Responding to the crisis in an improvised fashion, the Fed had reaffirmed the role of the dollar as the world’s reserve currency and established America’s central bank as the indispensable central node in the dollar network. Given the even vaster volume of daily transactions in global financial markets, it is not the sheer size of the effort that mattered. The Fed’s programs were decisive because they assured the key players in the global system—both central banks and large multinational banks—that if private funding were to become unexpectedly difficult, there was one actor in the system that would cover marginal imbalances with an unlimited supply of dollar liquidity. That precisely was the role of the global lender of last resort.