When the coronavirus brought the world economy to a halt in March, it fell to the U.S. Federal Reserve to keep the wheels of finance turning for businesses across America, the Wall Street Journal reported. And when funds stopped flowing to many banks and companies outside America’s borders — from Japanese lenders making bets on U.S. corporate debt to Singapore traders needing U.S. dollars to pay for imports — the U.S. central bank stepped in again. The Fed has long resisted becoming the world’s backup lender. But it shed reservations after the pandemic went global. During two critical mid-March weeks, it bought a record $450 billion in Treasurys from investors desperate to raise dollars. By April, the Fed had lent another nearly half a trillion dollars to counterparts overseas, representing most of the emergency lending it had extended to fight the coronavirus at the time. The massive commitment was among the Fed’s most significant — and least noticed — expansions of power yet. It eased a global dollar shortage, helped halt a deep market selloff and continues to support global markets today. It established the Fed as global guarantor of dollar funding, cementing the U.S. currency’s role as the global financial system’s underpinning. Just as the Fed expanded its role in the U.S. economy to an unprecedented degree during the 2008 financial maelstrom, it has in the coronavirus crisis expanded its power and influence globally.
