The $29 Trillion Secret: How the Federal Reserve Quietly Bailed Out Wall Street — and the World

By Joe Marzo

The $29 Trillion Secret: How the Federal Reserve Quietly Bailed Out Wall Street — and the WorldIn 2009, as the U.S. economy teetered on the edge of collapse, Americans turned their outrage toward a $700 billion rescue plan for the banks — the infamous Troubled Asset Relief Program, or TARP. The Tea Party was born from this fury. Talk of bailouts, moral hazard, and government overreach dominated headlines.

But as the nation argued over the visible bailout, something far more massive was happening in the shadows.

Behind closed doors, the Federal Reserve committed between $16 and $29 trillion in secret emergency lending — not just to American banks, but to foreign governments, multinational corporations, and the most powerful financial institutions in the world.

It was the largest financial rescue operation in history — and most Americans still have no idea it happened.

What Was This Money?

This wasn’t taxpayer money in the traditional sense, and it wasn’t a single lump-sum bailout. Instead, the Fed used a suite of emergency powers to inject trillions of dollars into the financial system in the form of short-term loans, asset purchases, and liquidity swaps.

The difference between the $16 trillion and $29 trillion estimates lies in how the money was counted:

• The $16 trillion figure, reported by the Government Accountability Office (GAO), reflects the peak outstanding loans — the maximum amount loaned out at any one moment.

• The $29 trillion figure, calculated by the Levy Economics Institute, includes every loan issued over time, even if banks borrowed and repaid the same amount repeatedly. If Citigroup borrowed $50 billion and repaid it weekly for a year, that added up to $2.6 trillion cumulatively.

The higher number reflects how dependent banks and corporations were on this revolving, secret line of credit from the Fed — and how frequently they needed to be rescued again and again.

The Programs No One Voted For

Using rarely invoked powers under Section 13(3) of the Federal Reserve Act, the Fed created emergency programs with names few Americans have heard:

The Term Auction Facility (TAF) funneled nearly a trillion dollars into banks that were too embarrassed to borrow in public. The Primary Dealer Credit Facility (PDCF) extended overnight loans to Wall Street investment banks — including Goldman Sachs and Morgan Stanley — even accepting shaky collateral like mortgage-backed securities.

The Term Securities Lending Facility (TSLF) allowed banks to temporarily swap toxic assets for pristine Treasury securities so they could raise cash elsewhere.

Meanwhile, the Commercial Paper Funding Facility (CPFF) lent billions directly to major corporations that couldn’t issue short-term debt in the collapsing markets. General Electric, whose massive GE Capital arm had become a shadow bank, borrowed over $16 billion. Ford Motor Credit, Toyota, Verizon, McDonald's, and American Express all tapped the facility to cover operational costs.

The Fed also formed three off-balance-sheet shell companies — Maiden Lane I, II, and III — to buy up toxic assets from the collapsed Bear Stearns and the crippled AIG. These entities purchased billions in worthless securities, shielding the rest of Wall Street from the fallout.

To prevent a collapse of money market funds, the Fed created other programs to absorb risk and lend to mutual funds — including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) and the Money Market Investor Funding Facility (MMIFF).

And then there were the currency swap lines — emergency arrangements with foreign central banks like the European Central Bank, Bank of Japan, Bank of England, and Bank of Korea. These swaps allowed foreign governments to access dollars, which they in turn used to prop up their own banks and corporations. At the height of the crisis, over $586 billion was outstanding in these arrangements — but over $10 trillion flowed through them in total. Foreign central banks from Sweden, Mexico, Denmark, Switzerland, Brazil, Canada, and Australia all participated.

Who Got the Money?

The largest single recipients were the U.S. megabanks:

• Citigroup borrowed over $2.5 trillion.

• Morgan Stanley tapped over $2 trillion.

• Merrill Lynch received just under $2 trillion.

• Bank of America took more than $1.3 trillion,

• and Goldman Sachs borrowed at least $814 billion.

But foreign banks were just as dependent:

• Barclays (UK): $868 billion

• Royal Bank of Scotland (UK): $541 billion

• Deutsche Bank (Germany): $354 billion

• UBS (Switzerland): $287 billion

• Credit Suisse (Switzerland): $260 billion

• BNP Paribas, Societe Generale, and Dexia (France): collectively hundreds of billions

  
  

All of this happened with no public disclosure at the time, and no congressional oversight.

Who Approved It?

No one you voted for.

The key decision-makers were a handful of Federal Reserve officials led by Chairman Ben Bernanke, who later admitted they had intentionally concealed the full extent of the programs to avoid sparking panic.

Timothy Geithner, president of the New York Fed during the crisis, oversaw the most powerful of these facilities — and was later promoted to U.S. Treasury Secretary. His successor, William Dudley, a former Goldman Sachs economist, continued directing the bailouts even as his former firm benefited directly.

The Fed's regional boards were laced with conflicts of interest. Jamie Dimon, CEO of JPMorgan Chase, sat on the board of the New York Fed while his own bank received bailout funds. Stephen Friedman, a former Goldman Sachs chairman, sat on the same board and purchased Goldman stock during the crisis — a move that led to his resignation but no penalties.

Was It Paid Back?

Most of the loans were technically repaid, and the Fed claims it even made a small profit on the interest. But the deeper truth remains troubling.

While Wall Street and foreign governments got trillions in near-zero-interest liquidity, Main Street was left to collapse. No homeowners were directly rescued. No small businesses received comparable terms. No major bank executives went to jail, and the largest institutions emerged bigger and more powerful than before the crisis.

The real cost wasn’t the money loaned. It was the loss of public trust, the lack of accountability, and the permanent embedding of “too big to fail” into America’s financial DNA.

Why Didn’t We Know?

The Fed resisted transparency at every turn. Bloomberg News had to sue under the Freedom of Information Act, and Senator Bernie Sanders pushed for a one-time audit of the Fed as part of the 2010 Dodd-Frank reform law.

The results of that audit weren’t released until 2011, by which point the media had largely moved on. There were no prime-time specials. No widespread public reckoning. The story was simply too big, too complex, and too threatening to the financial order to be given the coverage it deserved.

Conclusion: The Debt We Never Recovered

While politicians publicly battled over $700 billion in TARP funds, the Federal Reserve quietly funneled up to $29 trillion into the global financial system, rescuing banks, corporations, and foreign governments in secret.

The money may have been paid back on paper. But the public was never told the full truth, and the American people never had a say.

The result? A financial system that’s more concentrated, more globalized, and still dependent on the quiet power of the central bank — now emboldened to act without oversight whenever crisis strikes again.

Sources

• Government Accountability Office (GAO), Audit of the Federal Reserve, 2011

• Bloomberg News, Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress

• Levy Economics Institute, Working Paper No. 698: $29 Trillion Bailout Analysis, James Felkerson

• Federal Reserve Bank of New York, Emergency Lending Program Disclosures

• Matt Taibbi, Rolling Stone, “The Real Housewives of Wall Street”

• Congressional Oversight Panel Reports (2009–2010)