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THE FED IS QUIETLY BAILING OUT WALL STREET  
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Luke Goldstein, Freddy Brewster
January 14, 2026
Jacobin
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_ The Federal Reserve has quietly delivered nearly half a trillion
dollars to Wall Street with few strings attached over the past few
months. These cash infusions could signal instability in the broader
financial sector. _

The New York Federal Reserve has recently delivered a series of major
cash transfers to Wall Street., Al Drago / Bloomberg via Getty Images

 

The Federal Reserve has quietly delivered nearly half a trillion
dollars to Wall Street with few strings attached over the past few
months through an obscure government financial program intended for
banks struggling to make cash payments.

These cash infusions could signal instability in the broader financial
sector — and come as the central bank is besieged by
potentially market-rattling turmoil
[[link removed]] following
the Trump administration’s launch of a criminal investigation
[[link removed]] into
Federal Reserve chair Jerome Powell
[[link removed]].

The New York Federal Reserve, a regional branch of the larger central
bank that works to maintain the country’s financial stability,
kicked off the new year by dumping nearly $97 billion
[[link removed]] into the
banking sector since December 31, 2025.

The move is the latest in a series of major cash transfers the New
York Federal Reserve has recently delivered to Wall Street.

The infusions began with an $11 billion transfer on June 30. In
October, the transfers became much more frequent, culminating in a
massive $50 billion infusion on Halloween, as first reported by
investigative news outlet _DCReport_
[[link removed]].
In total, after doling out little to no money since July 2020, the New
York Federal Reserve has transferred more than $420 billion
[[link removed]] to Wall
Street in the past seven months — a record amount
[[link removed].] from
the program.

For comparison, that lump sum is nearly equivalent to the pot of
money [[link removed]]
that Congress passed to bail out the banks during the 2008 financial
crisis under the Troubled Asset Relief Program
[[link removed]].

New York Federal Reserve's repurchase agreement operations over the
past five years. Credit: Federal Reserve Bank of New York

Amid the deluge, the central bank has encouraged
[[link removed]] Wall
Street to make use of the program and lifted
[[link removed]] its $500
billion
[[link removed].] cap
on such transactions, meaning there is no limit to how much banks can
borrow to meet their cash liquidity needs.

All of these cash infusions — issued through an arcane and newly
restructured division
[[link removed]] of the New
York Federal Reserve branch — amount to some of the largest cash
bailouts since the COVID-19 pandemic sent shock waves through
financial markets in 2020.

Experts argue that this uptick in Federal Reserve lending could
indicate that banks do not have the liquid cash on hand to make
payments and dole out loans. But the circumstances driving those
transactions — and whether they signify broader financial turmoil
— remain unknown. It’s unclear, for example, which banks received
the funds, since that information is kept secret
[[link removed]] for two years to help protect the
institutions’ reputations.

“Without more information, it’s impossible to say whether this is
a good big deal or a bad big deal [that] regulators are getting banks
to use liquidity facilities or . . . if the financial system is under
stress,” said Todd Phillips, a former senior attorney at the
Financial Deposit Insurance Corporation, a federal agency that
oversees the banking sector.

In an email sent to the _Lever_ after publication_, _the New York
Federal Reserve said the large infusions were routine activities and
disputed the idea that they might indicate looming market disruptions.

“[These] are temporary short-term loans to assist in funding
operations . . . they are a market functioning tool, primarily used to
support effective monetary policy implementation and interest rate
control,” wrote a bank spokesperson_._

“It’s a Moral Hazard”

The cash infusions are intended to provide additional liquidity to
banks that are short on cash so they can continue extending lines of
credit to the public and businesses.

These infusions, called repurchase agreements, are a form of
short-term lending in which the Federal Reserve trades cash in
exchange for assets, usually Treasury bills and mortgage-backed
securities, as collateral from the banks. But according to critics,
the money has instead frequently ended up
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the hands of hedge funds and other financial firms, which often use it
to make risky bets
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various securities and derivatives that can be more profitable than
ordinary loans.

“It’s a problematic signal that markets are using the liquidity
for reasons that are not part of the intention of providing liquidity
in the first place,” said Phillip Basil, a director at the consumer
advocacy group Better Markets. “That’s the problematic thing about
this, [banks] end up using [the funds] for just financial market
transactions, instead of allowing it to flow to more productive
places.”

If banks are tapping the Federal Reserve’s repurchase agreement
operation to cover their losses from poor financial decisions, that
could encourage further risky financial behaviors.

“Financial firms have learned and are just kind of expecting that
anytime something bad happens, the Fed is going to bail them out . . .
it’s a moral hazard,” said Phillips.

Banks usually first turn to the private markets when they need cash to
make payments on loans and for lending purposes. But higher interest
rates for private repurchase agreements have led to a recent slump
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the industry, so the New York Federal Reserve stepped in
and encouraged
[[link removed]] banks
to instead use its in-house repurchase agreement provider, offering
more favorable rates than those available in the private market.

While this practice was previously only used for emergency
circumstances, the central bank in 2021 turned
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operation into a “standing repo facility” to expand its lending
even in noncrisis periods and “support smooth market functioning.”

Historically, banks have been reluctant
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use the Federal Reserve for short-term lending unless they’re
desperate because it can send a signal
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the market that the institution is short on cash. Over the past year,
the Federal Reserve has tried to break that stigma by urging
[[link removed]] banks
to utilize the system. Federal Reserve economists believe
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policy acts as a relief valve to keep interest rates within their
target margins.

“With the steady decline in the level of reserves, we have observed
upward pressure on [repurchase agreement] rates at times in recent
months,” New York Federal Reserve president John C. Williams told
[[link removed]] the
New Jersey Bankers Association on December 15. “When this occurs,
the Fed’s standing [repurchase agreement] operations can act as a
shock absorber by capping pressures on money market rates resulting
from strong liquidity demand or market stress. I fully expect that
standing [repurchase agreement] operations will continue to be
actively used in this way.”

While the recipients of these infusions aren’t immediately
disclosed, the considerable size of the recent repurchase agreements
suggests that one or more of the largest banks in the country are
likely involved.

Financial analysts writing for _DCReport_ suggest
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massive cash infusion could be an effort to shore up the billions of
dollars that some major banks have lost from shorting precious metals.
The commodity’s price has soared
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historic levels thanks in part
[[link removed]] to technology-
[[link removed]] and defense-sector
[[link removed]] demand,
leading to massive losses for those who had bet that prices would
drop.

“Highly Negative Consequences”

President Donald Trump has long tried to exert more control over the
Federal Reserve, an independent banking regulator whose top official
is appointed by the president and confirmed by the Senate.

During his 2024 presidential campaign, Trump said
[[link removed]] the
president should have a say in setting interest rates and other
economic matters. Then, last March, after Trump took office, the
president began publicly pressing
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Federal Reserve to lower interest rates to help stimulate
[[link removed]] borrowing
and economic activity.

In August, the Trump administration accused
[[link removed]] Federal
Reserve governor Lisa Cook, who helps set
[[link removed]] interest rates, of
mortgage fraud and referred the matter to the Justice Department.
Later that month, Trump tried to remove Cook
[[link removed]] from
her position, but the Supreme Court
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her to remain in her position at least until it hears arguments
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matter on January 18.

Now the Trump administration has launched a criminal investigation
[[link removed]] into
Powell, the Federal Reserve chairman who sets policy on interest rates
and other economic matters, over whether he lied to Congress about the
agency’s $2.5 billion
[[link removed]] renovation
of its Washington, DC, office.

On Sunday, Powell released a statement
[[link removed]] claiming
the probe is likely an attempt to pressure him and other high-ranking
Federal Reserve officials to lower interest rates.

A number of former Federal Reserve officials, including Alan
Greenspan, Ben Bernanke, and Janet Yellen, called
[[link removed]]the
investigation an “unprecedented attempt” to undermine the Federal
Reserve’s independence and warned that “This is how monetary
policy is made in emerging markets with weak institutions, with highly
negative consequences for inflation and the functioning of their
economies more broadly.”

This article was first published by the Lever
[[link removed]], an award-winning independent
investigative newsroom.

_LUKE GOLDSTEIN is a reporter with the __Lever__. He is an
investigative journalist based in Washington, DC, who was most
recently a writing fellow at the __American Prospect__ and was with
the Open Markets Institute before that._

_FREDDY BREWSTER is a reporter with the __Lever__. He has been
published in the __Los Angeles Times__, NBC News, CalMatters, the
__Lost Coast Outpost__, and more._

_JACOBIN is a leading voice of the American left, offering socialist
perspectives on politics, economics, and culture. The print magazine
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_Subscribe to Jacobin_ [[link removed]]_ today, get
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* United States
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* Economy
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* capital
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* Banks
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* Wall Street
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* federal reserve
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* bailout.
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