It was no secret that small, unassuming, professorial Ben Bernanke straddles the U.S. like a colossus. I have long felt that his "out-of-the-box" thinking and long study of The Great Depression made him extraordinarily effective as head of our Fed during the dark days of the Global Financial Crisis. I think he did a great job!
But, who knew he was also straddling the world? We learned yesterday that the Fed made $3.3 trillion in short term liquidity loans during the crisis, almost all of which have been repaid in full. While most of that went to U.S. firms, a surprising amount assisted foreign firms. (Because the report is 2,100 pages long, describing all transactions in all programs, the total is not yet available.)
In addition, there is now a rumor that the Fed will contribute to the European bailout fund, so it could handle a bailout of bigger nations, like Spain or Italy, probably preserving the European Union. The power of a "reserve currency" is greater than reasonable, but not unlimited.
Like a colossus . . .
