In their Sept. 13 column in their Wall Street on Parade blog, Pam and Russ Martens document that the Federal Reserve began what became many years of bailing out Wall Street on Sept. 11, 2001, and not in December 2007 as the financial system was melting down. The reality, they point out, is that, as of Sept. 10, 2001, the Nasdaq was already imploding, having lost 66% of its market value, which wiped out $4 trillion of wealth. In fact, at that time, then-New York State Attorney General Eliot Spitzer had already been on the case of Wall Street megabanks, because of their practice of bringing to market IPOs of companies that many of the banks’ own research analysts referred to as “crap” and “dogs"—and yet, those same banks were aggressively recommending to an unsuspecting public that they buy up these “dogs.” The Martens point to a Congressional Research Service report that showed that the Fed channeled $100 billion per day over the three-day period beginning on 9/11 to Wall Street firms. According to the Fed’s own annual reports, its balance sheet grew from $609.9 billion at the end of 2000 to $654.9 billion at the end of 2001, to $730.9 billion at the end of 2002, and $771.5 billion as of Dec. 31, 2003.
The Martens go on to document the myriad ways in which the Fed rescued Wall Street after Sept. 11, including by dramatically slashing the Fed Funds Rate and the Discount Rate to unprecedentedly low levels, and by executing repurchase agreements. Normally the latter never exceeded more than a few billion dollars a day; but the Chicago Fed’s 2001 annual report showed that on Wednesday, Sept. 12, 2001, the Fed injected $38 billion; on Sept. 13 this rose to $70 billion, and on Sept. 14, to $81 billion. They report that, to this day, the public has no idea which Wall Street banks needed such an enormous injection of money. Eighteen years later, they document one more example of how “another horrific tragedy for America became the golden goose for Wall Street,” when on Sept. 17, 2019, four months before the first COVID case appeared in the U.S., the Fed began another bailout of Wall Street, by offering massive repo loans, which “grew exponentially during the pandemic.”
